How to Shop for a Mortgage

After hitting record lows of 3.250% last year, mortgage rates have inched up a little and in the grand scheme of things…it is only a little!  The trend of course is upwards and like the stock market, it is not a straight line up, we have good days and bad days in the markets and Mortgage Rates can sometimes and do change a few times inside a trading day. These rate changes are influenced by the global economy and while rates are still extremely low, refinancers and homebuyers are always looking for the lowest. Rates trade in real-time and react to each little development. But these lows come and go in minutes during specific trading intervals each trading day. And this kind of volatility drastically changes the way consumers should shop for a mortgage.  Because markets move up and down so fast right now, the rates you see in mainstream media* headlines are long gone by the time you can do anything about it.

SO HERE’S HOW TO SHOP FOR A MORTGAGE IN THIS NEW WORLD.

Shop For Loan Agents, Not Rates

Every consumer shops for mortgages and they should. But this is the critical distinction: you should be shopping for the best mortgage advisor. If you have that, you’ll get the best rate.

Here’s what happens when shoppers focused only on rate get quoted by a good loan agent: Loan agent quotes a rate only after they’ve analyzed the client’s entire financial profile and analyzed their home’s value and condition—also known as pre-approving them. The client will either tire of the pre-approval analytics or be unhappy with the rate and go somewhere else. Then 80% of those cases come back to that loan agent because the competing rate quote was revealed to be incorrect when the other lender actually completed the client’s profile, or the home’s value/condition made the loan ineligible.

Mortgages are extremely competitive so rates and fees are generally the same with most (established, credible) lending firms.  What’s not the same lender to lender is the loan agent’s ability to: (1) advise properly, (2) analyze borrower and property profiles, and (3) close with no surprises. So shop to find the lender and loan agent you feel most confident can perform on these three things. Then work with that loan agent to pick a rate target you can’t or won’t go above, and give them a standing order to lock when they see it.

These guidelines are for refinancers. For homebuyers, you can’t lock a rate until you’re in contract to buy a home, but once you’re in contract, the same approach applies.

Rate Targeting

Their are two reasons for the pre-approval and rate targeting tactics discussed above:

(1) A rate quote that flies through the air means nothing. If a loan agent doesn’t issue you written terms after obtaining a full profile on you and your home, then you haven’t received a quote you can count on.

(2) Rate lows are here and gone in minutes each trading day as mortgage bonds rise and fall on economic and technical trading signals. So if you don’t first get pre-approved then set a rate target with a standing lock order, it’s nearly impossible to hit the lows AND close with no surprises.  Your loan agent also must be able to brief you daily or weekly on the market outlook, so if you’re not sensing market competence from your agent, then keep shopping. A loan agent must have a strong read on what’s impacting the rate market ups and downs to deliver you the best terms.

*Mainstream media is almost always off the mark on rate data and commentary. Conversely, Mortgage News Daily strives to provide accurate and realistic rate data and commentary daily. Still, the premise of this piece is to explain what a mortgage consumer must do to manage extreme rate volatility.

Do you have any questions?  Feel free to call or email anytime!!

Bill Nickerson can be reached at 978-273-3227 and email at bill@billnickerson.com

 

What is a Business Cycle?

The “Books” say an average business cycle is 44.4 months and we have lived through many of them. Some longer than that and some as short as a season in New England.  A business cycle is like the exhibit from our youth…“What makes an ocean wave, wave” at the New England Aquarium.  In the exhibit, you get to move the wave with a lever and if you move the lever too much you have to pull it back as the wave comes crashing down…and again, you go too far the other way and the wave crashes in the other direction.  It’s impossible to control an ocean wave.  So here we are now in the middle of a business cycle “The Ocean Wave”. 

As Americans we do the same thing.  When we feel confident and wealthy, we tend to spend a little too much; perhaps buy a car that has all the bells and whistles or buy the  house we all dreamed of or even dined at the newest expensive restaurant we’ve never been to… building up that ocean wave.  We did this as a nation and created a very large wave.  We are in the “Trough” of the business cycle which is like a dead calm in the sea.  Nothing moves.  We are paralyzed by our own actions and cannot find a direction to get back…there is just no wind for our sails.  As individuals, we are going through our own personal process of what will get us back on track.  In some cases, we cancel our vacations, limit the activities our children participate in at school or even bring lunch every day.  By drastically cutting our spending, we have moved the “wave” too far in the other direction thus hurting the economy even further.  Not only have we given up those fancy dinners…we are not even going to the local diner for the blue plate special.

Consumer confidence is measured at an all-time low today and we are letting our emotions and fear govern our decisions and actions.  The News Media has the ability to heighten this fear by focusing on the negative and over emphasizing the issues at hand.   As FDR said, “The only thing we have to fear is Fear itself”.  This speech was given in 1933 in the middle of one of the biggest bank panics of the century which followed the Stock Market Crash of 1929.  There was a “RUN” on the banks where consumers wanted to withdraw all of the cash they had in the banks for fear it would be gone.  The banks had lent this money out for loans, mortgages etc. and the banks quickly ran out of cash.  FDR implemented the Federal Deposit Insurance Corporation “FDIC” that to this day insures our deposits up to $250,000.  This speech did spark a generation as well as the economy, and it was backed by a plan of how to get us moving as a country.  Today, we do not look up to our leaders.   And as of this moment, we do not have a plan of how to get out of the economic turmoil we are in.  So as a strong country, we must take matters in our own hands and move ahead…full steam ahead.

We are in a very unique situation in the economy: Mortgage rates are creating new historical lows every day, house prices are nearing levels of value we have not seen since 2004.  As we always do, we will look back on this day and say, “I wish I had bought that home, or vacation house or even that investment property”.  Trust me; it happens every time we go through these business cycles.  As I mentioned earlier, we are letting our emotions govern our business decisions.  That is not allowed in business.  It’s business and there is no crying in business!!  Remember the saying “Buy Low and Sell High”.  This is not just some catch phrase.  It is a sound business decision that should be followed regardless of your emotional ties. 

So what do we do now? 

·         Keep spending but in a healthy way.  Make sound buying decisions based on needs versus wants.  By putting some money back into the economy, we will slowly recover.

·         Look to your advisers!!  Not your friends or family, but your financial advisers.  This would be the person that handles your investments, your banking, and your estate.  These are professionals that do this time and time again all day every day. 

·         Be patient.  Throughout history we have experienced turbulent times in the business cycle.  And we have pulled out of it.  In the words of Warren Buffett, “Americans are in a cycle of fear which leads to people not wanting to spend and not wanting to make investments, and that leads to more fear. We’ll break out of it. It takes time.”

For information regarding home financing or the economy, please contact me at     Bill@billnickerson.com   or    978-273-3227

Do I Really Need Title Insurance?

Title insurance is one of the important and least understood aspects of a real estate transaction. There are two types of title insurance; lenders’ coverage and owners’ coverage. Title insurance protects the lender and the owner against all types of title defects and also covers issues such as zoning, access, and protects the lender and owner against frivolous claims against title by providing legal defense against such claims.

In Massachusetts, a real estate attorney examines title to a property and must certify title to the lender and owner. However, this certification is based only upon a fifty year title search and is based only on the documents that are recorded at the Registry of Deeds.  There are many situations where an attorney has done his or her job perfectly, and yet title issues could exist. For instance, if there is a forgery in the chain of title or if there is an heir who was erroneously omitted from a probate notification, title to a property could be defective.  Additionally, if a document is improperly indexed at the Registry of Deeds or if a signatory to a deed is a minor or is incompetent, this could also make the title defective. These defects are called hidden defects and this is what makes title insurance so important to protect one’s interests.

The lender’s title insurance is required in practically every closing.  It is a common misconception on the part of buyers that if there is a lender’s policy in place, the owner’s policy adds little value, particularly where the mortgage is a high loan to value mortgage.  In fact, the lender’s policy does not protect the owner at all, as it only comes into play if the property is foreclosed by the lender and the lender is then unable to resell the property due to a defect.   In recent years, owner’s policies have saved the day when documents such as mortgage discharges and mortgage assignments have not been properly recorded at the Registry of Deeds, and the title insurance companies have provided the necessary assurances and guarantees to allow the closing to take place.

Each buyer should consult with his or her attorney to learn more about the costs and benefits of title insurance.  All title insurers provide a substantial discount when the lender’s policy and the owner’s policy are purchases simultaneously.

Courtesy of: 

Mark L. Scheier Esq.

Scheier & Katin P.C., Acton MA

MScheier@skactonlaw.com

Home Ownership….It’s still an American Dream

Every so often I come across information from other sources that I feel is relevant to what is going on in the economy in our area.  Today I want to share a great resource: the KCM blog.  In my opinion, their blog post today reaffirms that now is a great time to buy a home!

Source:   KCM blog:  National Housing Survey 2012  by The KCM Crew on April 4, 2012

Each quarter, Fannie Mae releases their National Housing Survey. They survey the American public on a multitude of questions concerning today’s housing market. We like to pull out some of the findings we deem most interesting each time it is released. Here they are for the most recent report:

84% of the general population believes that owning a home makes more sense than renting.

The Most Important Reasons to Buy a Home

When we talk about homeownership today, it seems that the financial aspects always jump to the front of the discussion. However, the study shows that the four major reasons a person buys a home have nothing to do with money. The top four reasons, in order, are:

1. It means having a good place to raise children and provide them with a good education
2. You have a physical structure where you and your family feel safe
3. It allows you to have more space for your family
4. It gives you control of what you do with your living space (renovations and updates)

The Home as an Investment

Though most people purchase a home for non-financial reasons, everyone realizes there is a money component to homeownership. Here is what they said on this issue:

• 63% of the general population believes that homeownership is a ‘safe’ investment.
• 53% believe that homeownership has more potential as an investment than any other traditional asset class.

Rent vs. Buy

We are always interested in the difference people see in renting vs. owning.

• 64% of renters have aspirations to someday own their own home
• 70% of renters think that owning is superior to renting

Bottom Line

Our belief in the value of homeownership grows each time this survey is released.

Do’s and Don’ts of Septic System Care

I recently wrote about Understanding Title V in my blog.  Today, let’s talk about caring for your septic system.  Septic systems must be maintained regularly to stay working.  Any type of neglect or abuse can cause harm to you and others as well as to the environment.  Here are some simple maintenance guidelines to follow.

DO have your tank pumped out and system inspected every 3 to 5 years by a licensed septic contractor. If the tank fills up with an excess of solids, the wastewater will not have enough time to settle in the tank.  The excess solids can then pass into the leach field and clog you drain.  You can find one listed in the yellow pages under Septic Tanks & Systems-cleaning.

DO keep a record of pumping, inspections, and other maintenance. Use a file folder to hold all records and receipts of maintenance.

DO know the location of your septic system and drain field. Keep a sketch of it handy for service visits.

DO practice water conservation. Repair dripping faucets and leaking toilets, run washing machines and dishwashers only when full, avoid long showers, and use water-saving features in faucets, shower heads and toilets.

DO divert roof drains and surface water from driveways and hillsides away from the septic system. Keep sump pumps and house footing drains away from the septic system as well.

DO take leftover hazardous household chemicals to your approved hazardous waste collection center for disposal. Use bleach, disinfectants, and drain and toilet bowl cleaners sparingly and in accordance with product labels.

DO use only septic system additives that have been allowed for usage in Massachusetts by MassDEP.  http://www.mass.gov/dep/water/wastewater/addallwd.htm

DON’T perform excessive laundry loads with your washing machine. Doing load after load does not allow your septic tank time to adequately treat wastes and overwhelms the entire system with excess waste water.   Consult a tank professional to determine how many loads of laundry you can do in a row to keep your tank operating properly.

DON’T use a garbage grinder/disposal, which feeds into the septic tank.  By adding food waste, you decrease your system’s capacity and increase your need to have the tank pumped more often.  If you have a garbage disposal severely limit its use.

DON’T allow anyone to drive or park over any part of the system. The area over the drainfield should be left undisturbed with only a mowed grass cover

DON’T make or allow repairs to your septic system without obtaining the required health department permit. Use professional licensed contractors when needed.

DON’T use commercial septic tank additives. These products do not help and some may hurt your system in the long run.

DON’T use your toilet as a trash can by dumping non-biodegradables down your toilet or drains. Non-biodegradables can clog the pipes.  Grease can also thicken and clog the pipes. Store cooking oils, fats, and grease in a can for disposal in the garbage.

NON-BIODEGRADABLES include:  grease, disposable diapers, plastics, etc.

DON’T poison your septic system and the groundwater by pouring harmful chemicals down the drain. They can kill the beneficial bacteria that treat your wastewater. Keep the following materials out of your system:

POISONS include:  gasoline, oil, paint, paint thinner, pesticides, antifreeze, etc.

And be alert to these warning signs of a failing system:

• sewage surfacing over the drainfield (especially after storms)
• sewage back-ups in the house
• lush, green growth over the drainfield
• slow draining toilets or drains
• sewage odors

Sources:  http://www.mass.gov/dep/water/wastewater/septicsy.htm#care, http://www.marealtor.com/content/title_5.htm

6 Mistakes Sellers Should Avoid

Spring is here!!  It’s a perfect time to make your move to downsize or upgrade.  If you’re considering selling your home, now is a great time to get your home on the market.  And with so many homes on the market for sale, the seller needs to make their home stand out above the rest.   Here are a few suggestions to get buyers interested in your home.

Turnoff mistake #1 – No listing photos

Many buyers browse listings online before deciding to view a home in person.  Great photos showing your home will draw more showings to your home.  Hire a professional photographer if possible.

Turnoff mistake #2 – Unrealistic Pricing

It’s very tempting to list your property at the highest price possible with the intention of lowering it if there’s no buyer interest in the home.  By pricing your home competitively from the start, you will get the most traffic and the quick sale close to your asking price.

Turnoff mistake #3 – Misleading Listing Info

Describing your home accurately allows the right type buyer to look at your home.  Say it’s a ready to move in home when in reality it’s a fixer up sends the message to home buyer that you aren’t trustworthy leading to loss of sale.

Turnoff mistake #4 – Botched Home Improvements

Think a fresh coat of paint will be great to sell your home? Before investing in pre-sale remodeling or painting, find out from your Realtor what type improvements/colors will give you a better chance at a sale.  The wrong choices could be a disaster to your hopes for a quick sale.

Turnoff mistake #5 – Dirty or Cluttered Interiors

Removing clutter and keeping the house clean sends the buyer a strong message; this home has regular necessary maintenance done to it. It also makes the home look more spacious, giving the buyer the chance to visualize the home with their own furnishings.

Turnoff mistake #6 – Hovering Homeowners

A fast way to send buyers running is for the homeowner to be present during a showing.  Buyers want to be left alone to view your home.  And the longer a buyer stays, the better chance of a sale.

10 Things to Remove Before Listing Your Home

Your home is your castle.  The furnishings, accessories, family photos, even the colors of your walls are all reflections of YOU!  When you decide to sell your home, you must take a step back and evaluate what your home will look like to potential buyers.  Most buyers can not see past the red walls, green carpet, personal items:  family photos, books, clutter….  There are some simple steps that you can take to make your home appear neutral…as in the buyer can visualize their belongings in your space.                                                             Please check out this post at Cathy’s Real Estate blog;

Septic Systems: Understanding Title V

If you are not from New England, where it all began…you may not be familiar with Title V Regulation, Septic Tanks, Tight Tanks, Leaching Fields and so on.  ‘Homes that are not connected to a sewer system use septic systems or cesspools, both of which are regulated by the state Department of Environmental Protection (DEP) and local boards of health.’¹

Originating back to France this technology developed by John Mouras was brought to the new country as early as 1883 and used in many towns and cities. ² Most homes in New England that were built in the 1600 and 1700’s were farms, cabins, single family homes in the middle of nowhere and most people would have an outhouse of some form.  In Cities, homes were able to hook up to public sewer systems.  In the late 1800’s rural communities did not have the luxury of hooking up to public water and sewer because of their location  so they relied on a private well for water and some form of a private septic system for disposal of waste.  The most effective private system providing you have the acreage is the septic system that carries the waste away from the home in the form of a leaching field.  The waste comes from the home via a PVC pipe and is delivered to a Distribution Box/Tank (D-Box), from here, the solids will settle to the bottom of the tank and the scum and liquids float to the top.  The liquids are then channeled away from the D-Box into long perforated PVC pipes.  Depending upon the design,  a typical trench system can use drainage pipes as long as 100 feet.  The length of the pipes is a direct correlation of how fast the leaching field will drain as well as how many bedrooms the system can handle.  The liquid waste and lighter material is carried along these pipes and then dispersed along these holes to another drainage system of sand and rock.  As this is biodegradable material, it will continue to break down, some will go back into the ground water, feed vegetation such as  the plants or lawn.   In homes that have no land or are built on a ledge or near bodies of water, a “tight” Tank may be installed.  This is exactly that, a tank, everything from toothpaste, soaps and detergents as well as waste is contained.  Once this gets filled up, it must be emptied of all its contents.

In today’s housing market, before selling your home, you must have your septic system tested by a licensed Title V inspector (The Title 5 regulation, 310 CMR 15.00)³.  They will inspect the system to make sure it has proper drainage, all the parts in are intact and the soil in and around the system remains solid.  A good system can last 20 plus years and can be repaired and updated as anything else in your home.  To maintain your system and to have it pumped regularly will extend the life of the system.

Now, if for any reason your system fails this inspection, you may have a very costly project.  Typically they fail because the land and soil are no longer breaking down the waste and it will no longer drain.  A new system can be designed and built in some cases in the same location but in many will be moved to another location of the property.  An Engineer and Board of Health will determine where the system can go and must adhere to local and state guidelines.  A new system can be as little as $10,000 and up to $40,000.  In a traditional sale of a home where a buyer obtains a mortgage, you cannot convey title (sell your home) until this system has a passing grade.  However, there are mortgage solutions for this type issue that allow for holdbacks and special financing options to cover the costs of the repairs or new system.

 Please email Bill for more information.   bill@billnickerson.com

¹ Massachusetts Association of Realtors. Title 5. http://www.marealtor.com/content/title_5.htm

² http://www.newtechbio.com/articles/history_of_the_septic_system.htm

³ http://www.mass.gov/dep/water/wastewater/buysell.htm

15 Interior Painting Tips and Techniques

It’s the spring market season.  A great time to spruce up your house before putting it on the market.  A fresh coat of paint is inexpensive and can transform a room from so-so to WOW!  I’ve painted many rooms and houses over the years; Here are a few tips that I have learned to help make your next painting project go quickly and easily!

1.  Use canvas drop clothes instead of cotton or plastic.  For an additional buffer to the canvas, you can put plastic under it.

2.  Clean dirty surfaces (walls, ceiling, and window sills) with a TSP spray solution so paint can form a strong bond.

3.  Fill any holes or imperfections with Spackle, wait for it to dry, and then lightly sand the patches.  Also scrape any peeling chipping paint.

4.  Stir your paint before you begin, and don’t paint straight from the can.  Mix several cans of paint together in a 5 gallon bucket for consistent paint color.

5.  Remove hardware, fixtures, closet doors.  Anything that might get in your way of painting.

6.  Taping is optional, especially if you have a reasonably steady hand. Using an angle brush, start slightly away from the edge and then curve in to meet it. This will help you avoid leaving a big blob of paint where you begin.

7.  Use a plastic grocery type bag (check for holes) to put your wet roller into for short term storage.  Wrap the bag around the roller (to create a seal) making sure all air is removed from inside the bag.

8.  Paint the ceiling first.  Whether you paint the walls or the trim next is up to you.  My preference is to paint the trim first because I find that I can get a cleaner line when I cut in to paint the walls. If you like to tape off your edges, you may find it easier to paint the trim last.

9. Use a good quality roller cover. Cheap ones leave a messy edge and can shed little fuzzies all over.  I use a fresh cover for each paint job versus cleaning it.  Cleaning a roller is time consuming and all that paint residue going into the water isn’t good for the environment.

10.  Use a good quality brush. I like a 2.5″ angle brush for most projects.  Any bigger and it’s too tough to have a good grip on the brush for painting.

11.  Only dip your brush about a half or quarter of an inch into the paint, then wipe off one side on the edge of the paint container. This will help you avoid paint runs (from using too much) and keep your brush in good condition.

12. Keep a wet edge, and always paint from dry to wet. This will minimize brush strokes and roller marks.

13.  Paint in long, continuous strokes. Not doing so is one of the most common mistakes.

14. When painting with a roller, aim for covering a three foot wide section at a time. Working from top to bottom.

15.  Put on a second coat. Your paint job may look OK after just one, but it will look better after two. If you’re using a dark or vivid color, you may even need three (or more) coats.

With a little prep and practice, painting a room is an easy, inexpensive DIY project and you can do it!

For more information about this topic or others, please email me at bill@billnickerson.com

The Do’s: Home Buying Process Made Easier

Last month I talked about The Don’ts: Home buying deal killers, the things that can negatively affect your mortgage approval process.  There was a very extensive list of don’ts but as you can see from a quick glance below….The Do’s list is quite a bit smaller.  Although this list is smaller, the following are essential in having a smooth mortgage process.

THE DO’s:

Do Stay Current on your Existing Accounts:  Late payments on your existing mortgage, car payments, or anything else that can be reported to a Credit Reporting Agency can cost you.

Do Continue To Use Your Credit As You Normally Would:  Red flags are easily raised within the scoring system.  If it appears you are diverting from your normal spending patterns, it could cause your score to go down.  For example, if you’ve had a monthly service for internet access billed to the same credit card for the past three years, there is no reason to drop it now.  If you want to make your changes, do it after the loan funds.

Do Get Pre-Approved:  Having your credit reviewed, your financials analyzed and an official  pre-approval gets you prepared for what you can afford ahead of time.  This will also allow you time to fix any issues that come up during this process as opposed to being in the middle of the transaction.

Do Call Your Loan Consultant:  Start out on the right foot – call a professional today who can guide you through the process every step of the way.

Although the mortgage approval process is much more extensive than it was in recent years, it really hasn’t changed much.  The key is being prepared.  By practicing these tips and keeping yourself from getting caught up in the Don’ts, you will find the process flowing smoother.  And your return will be greater!  So, don’t wait…now is a great time to buy a new home or refinance your current one!

Send me an email today for more information bill@billnickerson.com