So Why Do Mortgage Rates Change So Much?

Have you ever called a mortgage company and received a quote and then called back the next day and the same rate was no longer available??

Mortgage companies, Banks and Credit Unions are subject to potential daily and even hourly shifts in the market. Interest rates fluctuate on the simple principal of supply and demand.   

Mortgage rates trade based on Mortgage Back Securities and The Bond Markets as well as the overall economy.  The vehicles that mortgage rates are based on are considered very conservative, stable and tend not to have the wild swings that one would find in the Stock Market.  If the Stock market begins to see large increases or decreases, Investors will shift Billions of dollars in and out of the Stock Market and move them in to the Mortgage Markets.  This will cause mortgage rates to either rise or fall.  Stock Market tanks, good news for Mortgage Rates, Stock Market rallies and rates suffer.   Investors and Traders will constantly shift funds out of the riskier stocks into the safe haven of the mortgage markets.  These shifts can occur as little as once a day or in some cases can happen multiple times during a trading day. Thus causing mortgage rates to possibly change multiple times in a day.

These markets are affected globally as well; so even after the markets are closed in US, whatever is happening in Europe, Asia and around the world will cause our markets to move one way or the other.

What drives interest rates (click here for quick facts)

Here are some of the variables that are being watched in today’s market:

• Covid-19 – Global Pandemic
• Ukraine
• Europe and Asia’s Economy
• Comments by the President
• Politics
• The US Housing Market
• Unemployment in our Country
• The Price of Oil and Gas
• The “Feds” decision to move short term interest rates
• The overall health of the US Economy

Any of these items can trigger a rally one way or another.  Even a simple comment at a breakfast meeting by the President, the Fed Chairman or someone in power is enough to influence the markets.

Additional Mortgage Rate and Index Information:

To help us understand why mortgage rates change, it is important to realize that there is not one interest rate, but multiple ones. Below are some of the most prevalent interest rates and indexes that also have an impact on mortgage rates:

Prime rate – This rate is often offered to a bank’s best customers. If you are shopping for a home equity line of credit, then it is important to familiarize yourself with the prime rate. HELOCs are typically based upon the prime rate -plus or minus a certain percentage.

LIBOR – Stands for London Inter-bank Offered Rates. Libor rates are based upon the rates that a select group of London Banks offer each other for inter-bank deposits. Many adjustable rate mortgage programs use the Libor index.

Treasury bill rates ”T-bills” and Treasury Notes – These are short-term and intermediate debt instruments used by our Government to finance their debt. The treasury index is based upon the auctions of U.S. Treasury bills or on the Treasury’s yield curve. Like the LIBOR index, the U.S. Treasury index is a popular index for adjustable rate mortgage products. Also, the Twelve Month Treasury Average (12 Month MTA) is a popular index which is based upon the twelve month average of the monthly yields of U.S. Treasury securities (maturing in one year). The MTA is a popular choice for option arm mortgage programs.

Treasury Bonds – Unlike T-bills and Treasury Notes, treasury bonds are long-debt instruments. These bonds are used by the U.S. Government to finance its debt.

Cost of Savings Index – often referred to as the COSI index. This index is based upon the annual average of interest rates on World Savings deposit accounts. The average is pulled on the last day of each month.

11th District Cost of Funds – Often referred to as the COFI index – The COFI index is based upon the average of the borrowing cost to member banks of the Home Loan Bank of San Francisco of the 11th District. Unless you are shopping for an option arm mortgage, it is unlikely that your loan will be affected by this rate.

Certificates of Deposit Index – Often referred to as the CODI index – this index is arrived at by calculating the average of the past twelve months rates of 3 month CD rates.

Federal Funds Rate – The fed funds target rate is the rate which federally chartered banking institutions lend balances to other depository banks overnight.

This is a lot of information to weigh each day when calculating mortgage rates.  In general, most Banks, Investors, Lenders etc. will set rates around 10:30am once most of the morning economic reports have been released and the markets have had time to react to the information.  In a calm trading day on Wall Street, these rates would be good for that day.  In a day where lots of Economic reports and World events are occurring, these rates can be reset a few times as the Markets fluctuate.  It is important to call your lender or bank often to check on these rates as they can and will change.  It also important not to follow online rate sites that may be posting Average Rates as this information can be old as well a different Financial Picture then you may have.  The Freddie Mac rates are based on closed loans from last week and an average of .7 Points of fees in the rate. This may give you a range, but not accurate enough to base your mortgage payment on or what is happening today in the markets.

Bill Nickerson has been in the Mortgage industry since 1991. Please leave a comment, email or call me anytime with questions you may have about mortgage programs, rates and to get approved for a mortgage.

   NMLS# 4194  www.billnickerson.com  978-273-3227

Bill Nickerson

10 Things to do before listing your home

 To help make the selling process easier for you, it makes sense to have your home inspected before listing it.  It may sound like a hassle but it could save you a lot of money and stress early on.  The inspection will pinpoint red flags and areas that have potential problems.  It also gives you the opportunity to address those issues before listing your home.  Having your home already inspected ultimately also gives the prospective buyers the comfort and confidence that the seller actually cared about their home in the first place.  Be sure to share this information with prospective buyers by supplying a copy of the home inspection.  It is perfectly okay to choose not to have your home inspected before listing.  If you take this route, just be sure to do your own pre-listing home inspection to keep things significantly less nerve-racking and not terribly costly before the buyer’s home inspector comes through.

Here are 10 areas to look at/fix up before listing your home.

1.  Fix any deteriorated paint jobs.  Touch up any dings on the walls or woodwork, scrape and paint any flaking areas.

2.  For furnaces over 10 years old; pay to have it serviced and cleaned.  Then display the inspection papers (store them in a Ziploc bag) by taping to furnace.

3.  Make sure all toilets are flushed.  Nothing worse than having a seldom used toilet not functioning properly.

4.  Run water down sinks and bathtub drains.  All drains need to flow steadily.  No slow drains!

5.  Check for leaks under sinks and in vanities.  Tighten up joints if necessary.

6.  Check out the condition of the roof.  You want things to look normal: no missing shingles.

7.  Clean out the gutters.  They need to be free of debris for good drainage.

8.  Open and close all windows.  Check for springs working properly so windows don’t slam down. Make sure all the locks work and windows close tightly.

9.  Test any appliances like the dishwasher that you are leaving behind.  You want them working properly. Make sure all burners/oven are working on your stove.

10.  Test the auto reverse on the garage door.  Make sure the safety mechanism works.

For more information about Home Inspectors or how to prepare to list your home, call or email me anytime.  Bill’s Email  | Phone 978.273.3227

Before Putting Your Home on the Market

• Documents you will need
  • Deed
  • If you have right of ways, deed restrictions or easements get the documentation that clearly spells out the restrictions of the property.
  • Know if you are in a flood plain – FEMA’s website can be helpful.
  • Go to the Town Hall:
    • Field card at the assessor’s office
    • Get your most recent  paid tax bill
    • A plot plan
    • Title V report if it has been complete and the pumping schedule
    • Talk to the engineering department get a sense of any upcoming projects that may be done around the home.
    • Building department will have a list of all permits pulled and renovations done to the home including electrical, plumbing and addition upgrades
  • If you are in a condo
    • Condo financials to include the budget,  the last three months condo association meeting minutes and if they have it a list of current and future project that are going to be done to the properties
    • Condo Rules and Regulations
    • Master Deed and Master Insurance.
    • Verify there are no pending lawsuits with association
    • Know the owner occupancy rate of your complex
  • Home List
    • Create a list of renovations and updates that have been done to the property
    • Get utility bills for the last 12 months: Electric, oil, gas, propane, plowing, landscaping…
    • Write a letter to potential buyers of what you love about your home, neighborhood and town.

For more information about selling your home, feel free to contact me anytime.  I can be reached at 978-273-3227 or email be here: Bill’s Email

Bill Nickerson | NMLS #4194 | www.billnickerson.com | 978-273-3227 | bill@billnickerson.com

What are Closing Costs?

Closing costs are an accumulation of charges paid to different entities associated with the buying and selling of real estate. For buyers in Massachusetts, closing costs will come to about $3500 plus lenders title insurance and any pre-paid items such as real estate taxes, insurance and interest.

There may be closing costs customary or unique to a certain locality, but closing costs are usually made up of the following:

Third Party Fees (The Hard Costs)

• Attorney’s fees (yours and your lender’s if applicable)
• Appraisal
• Credit Report Fee
• Lenders administrative costs
• Recording fees
• Plot Plan or Survey fee
• Title insurance (yours and your lender’s)
• Loan discount points (click to the left to see if points are worth it)
• Any documentation preparation fees

Pre-Paid Items:

• Property taxes (to cover tax period to date)
• Interest (paid from date of closing to the following first of the month)
• First payment to escrow account for future real estate taxes and insurance
  • 3 to 4 months of real estate taxes to be held in escrow
  • 2 months of homeowners insurance to be held in escrow
• Paid receipt for homeowner’s insurance policy (including fire and flood insurance if applicable)
• First premium of mortgage insurance (if applicable)

Additional Items that No One Tells You About:

• Purchase and Sales Review
• Recorded Homestead Act
• Representation from a real estate attorney other than what the bank provides
• Home Inspection
• One Year of Homeowners Insurance up front
• Owners Title Insurance
• Buying the Oil in the Oil Tank of your new home

For more details regarding these items, please see my blog post: Home Buying Closing Costs: What to Expect

Or for more clarification on closing costs and how you can save your buyers money, feel free to contact me anytime at bill@billnickerson.com 

 

 

Can I give you a Piggy Back?

Whether you call them Piggy Back Loans, Blended Mortgages, A first and second, 80-10-10, these loans are extremely helpful in avoiding Private Mortgage Insurance (PMI).

The Piggy Back

When you have less than 20% to put down on a home, you are charged Private Mortgage Insurance, this added cost is based on the actual down payment as well as your credit score and in some cases can be in the hundreds of dollars per month.   Several years ago, many banks, lenders and mortgage companies created a program that would allow having a first and second mortgage to avoid the high cost of mortgage insurance.  At the end of the Housing Bubble, many banks, lenders and mortgage companies went out of business, these second mortgage and lines of credit nearly disappeared.  They were still available, they were just really hard to find.

Based on your purchase price, you would take out a first mortgage in the amount of 80% of the price and a second loan in the amount of 10%.  You would still be borrowing 90% of the purchase price (10% down payment).  In doing so, you have lowered the loan-to-value ratio (LTV) of a first position mortgage to under 80%, thereby eliminating the need for private mortgage insurance (PMI).

Example: Here is a comparison of using the Piggy Back Mortgage versus a mortgage with PMI.  This is based on a purchase price of $400,000 with 10% down on a single family home and assuming a credit score of 740 or greater.

Without the Piggy-Back:  You would have a first mortgage of $360,000, using a mortgage rate of 4.5% on a 30 year fixed.  This would give you a mortgage payment with PMI in the amount of $1,980.07.  $156 of this payment would be PMI.  PMI payments do vary based on the actual down payment as well as the credit score of the borrower, but this will give you a good idea of what the payment would be.

With a Piggy-Back loan using the same purchase price.  In this example you would have a first mortgage in the amount of 80% of the purchase price, $320,000 and a second mortgage in the amount of $40,000.  The second mortgage can also be a line of credit and in both cases the second mortgage rates is typically higher.  Using a rate of 6.00% for the second, this gives you a total mortgage payment of $1,861.21.  This is a total savings of $118.86 per month.  This is a conservative estimate.

The savings can be in the hundreds, most of these piggy-backs are in the form of a Line of Credit (home equity line of credit) and are adjustable rate products.  This rate is tied to the Prime Rate that the Federal Reserve sets and can be adjusted a few times a year.   Even though the rates are still at all-time lows, these lines of credit will go up in the future.  When obtaining a piggy-back mortgage, you  need to have a strong financial plan of how you can either make additional payments to this loan or be in a position to pay it off within several years.

For more information in regards to Piggy Back mortgages and other programs that eliminate mortgage insurance, feel free to call or email me anytime.

Bill Nickerson -NMLS #4194  978-273-3227 cell

 Bill Nickerson 

Adjustable Rates 101

An Adjustable Rate Mortgage provides a specific fixed rate term before becoming an adjustable mortgage.  An example: A 10/1 ARM is fixed for the first 10 years and then becomes a 1 year adjustable rate for the remaining term of the mortgage, thus giving you 10 years  of security at a fixed rate.

Advantages: If you know that you are selling your home in a short period of time, 10-12 years or less, you can get a mortgage rate that is 3/4’s to 1 full percent below the traditional mortgage rates.  Today a 10 year ARM is 3.25% and you can borrower up to 2 Million Dollars.

How do they work?

Adjustable Rate Mortgages (ARM’s) come in many different varieties.  The most common ARM’s are the following:  Three Year, Five Year, Seven Year and a Ten Year.  You will also see them displayed in this format as well:  3/1, 5/1, 7/1 and 10/1.  The first number represents the amount of years the loan will be fixed for and will not change from its original start rate.  The higher the first number or term, the higher the interest rate will be.

The second number represents how often the ARM will adjust after the fixed rate term ends.  Using a 5/1 ARM as the example, when your fixed term is about to expire, the Lender will send you a notice via mail notifying you that your rate is about to adjust and what that adjustment will be.  This will occur 45 days prior to this expiration date, in this case that would be 60 months in to this loan (5 Years). The new rate will be set for one year, or the term that is stated in the second number, 5/1.

The adjustments are based on 2 variables, the index and the margin.  The margin is set on the day you get the mortgage and is usually in the range of 2.25 or 2.75 depending upon the type of ARM you go with.  This will never change and is set for the life of the loan.  We would then add the current Index to this margin and combined that would create your new rate.

The Index can come from many places but is selected when we lock in your loan.  Typically we use the One Year Treasury Bill or the One Year LIBOR.  Both indexes move fairly slowly.  These Indexes are always posted in the Wall Street Journal but is very easy just to Google these terms. This will show you the current rate as well as show the history of these rates. You can also click this site at the US Treasury

Today’s one year treasury is at 1.30, this is the index.  Add this to the margin of 2.50 and your new rate today would be 3.875%. This rate would be rounded up to the next highest 1/8^th and this would give us 3.875% for one year.  Remember, this is what the rate would adjust to after the fixed term has ended.

Caps: Your loan comes with caps of 5/2/5, each number represents how your loan will adjust.  With the first adjustment the loan can adjust 5% up or down from the original start rate. The second number “2” is what it can adjust each time for the remaining years of the loan.  So, the second adjustment and every one after that the rate can move up or down a maximum of 2%.  The last number is the Life Cap.  This rate will never go higher than 5% of the starting rate.  So if you lock in a rate of 3.25% today, your rate would never exceed 8.25%.  To give you an idea, since 1996, this rate has not exceeded 8.25% at its high point. In the last several years, this rate as adjusted downward and as low as 2.00% in many cases.

I hope this is helpful. Always feel free to ask questions about any of this information. Email me at Bill@billnickerson.com or call 978-273-3227.

Thank you very much,

Bill Nickerson NMLS# 4194 | Flagstar Bank| 1500 District Avenue, Burlington MA

The Perfect Loan File

This article came from Mark Greene contributor to Forbes Magazine.  It is very helpful to all of us so that we can truly understand what is going on in this industry and so that we can educate our buyers and sellers.

The media has it all wrong – securing mortgage approval and satisfying credit underwriting guidelines are not the difficulties plaguing mortgage consumers. It’s in meeting the rigorous documentation requirements that most people fall flat. The good news is, the fix is simple. Just scan, photocopy, fax, and deliver every aspect of your financial life. Then, shortly before closing, check everything again.

Mortgage consumers who enter the mortgage approval process ready to battle their chosen mortgage lender will come out with a nightmare story to tell. As the process, requirements, and guidelines are the same for everybody, your mindset is the game-changer. Accepting the redundant documentation necessary for lender approval will make everyone’s life easier.

When I was a kid, my father occasionally issued directives that I naturally thought were superfluous, and when asked why I needed to do whatever it was he wanted me to do, his answer was often: “Because I said so.” This never seemed to address my query but always left me without a retort, and I would usually comply. This is exactly what consumers should do during the mortgage approval process. When your lender requests what seems to be over-documentation and you wonder why you need it, accept the simple edict – “because I said so.” You will find the mortgage approval process much less frustrating.

So, what’s the perfect loan? Well, it’s one that (a) pays back the lender and (b) pays back the lender on time. Underwriting the perfect loan is not the goal that mortgage lenders aspire to today.

The real goal is the perfect loan file.

Mortgage lenders have suffered staggering losses and gone out of business because of the dreaded loan repurchase. As mortgage delinquencies increased, Fannie Mae and Freddie Mac began to audit mortgage loans they had purchased and discovered substandard and fraudulent underwriting practices that violated representations and warranties made, stating these were high quality loans. Fannie and Freddie began forcing the originating lenders of these “bad” loans to buy them back. So a small correspondent mortgage lender is forced to buy back a single mortgage loan in the amount of $250,000. This becomes a $250,000 loss to a small mortgage business for a single loan, because it will never be repaid.

It doesn’t take many of these bad loan buybacks to close the doors on many small mortgage operations. The lending houses suffered billions of dollars of losses repurchasing loans from Fannie and Freddie, and began to do the same thing for loans they had purchased from smaller originators.

The small and medium sized mortgage originators that survived created underwriting guidelines and procedures to eliminate the threat of future loan repurchase losses. The answer? The perfect loan file.

It’s no longer necessary to have excellent credit, a big down payment and stable employment with income sufficient to support your debt service to guarantee your loan approval. However, you must have a borrower profile that meets the credit underwriting guidelines for the loan you are requesting. And, more importantly, you have to be able to hard-copy-guideline-document your profile.

Every nook and cranny of your financial life has to be corroborated, double- and triple-checked, and reviewed again before closing. This way, if the originating lender has created a loan file that is exactly consistent with published underwriting guidelines and has documented while adhering to those guidelines, the chances are that your loan will not be subject to repurchase.

Borrowers also need to prepare for processing and underwriting. Processors and underwriters are the people trained and charged with gathering (processors), all of your required-for-approval financial documents, and then approving (underwriters), your loan. You can assume these people are well trained and very experienced, as they are tasked with assembling and approving a high-quality-these-people-will-pay-us-back loan file. But just how do they go about that?

The process begins with the filter – the loan originator (a.k.a loan officer, mortgage consultant, mortgage adviser, etc.) – tasked to match the qualifications of a particular mortgage deal to the appropriate underwriting guidelines. It is the filter’s job to determine if a loan scenario is approvable and to gather the documentation to support that determination. It is here, at the beginning of the approval process, where the deal is made or broken. The rest of the approval process is just papering the file.

The filter determines whether the information provided by the borrower can be validated and documented. This is simple, since most mortgages are approved by automated underwriting engines such as Desktop Underwriter, and the automated approval generates a list of the documents needed to paper the loan file. An underwriter can, at this stage, request additional supporting documentation evidence at their discretion, as not all circumstances neatly fit into the prescribed underwriting box. If the filter creates a loan file with accurate information, then secures the documentation resulting from the automated underwriting findings, the loan will close uneventfully.

So, let’s begin with the pre-approval call. Mortgage pre-approval is typically accomplished with a telephone interview. A prospective borrower calls a mortgage rep (filter), and the questions begin. There will be lots of questions as this critical phase of the process is akin to the discovery period in a trial – you’ll need to disclose everything. Expect to answer queries on what you do for a living, how long you’ve been employed in your current field, and what your salary is. If there is a co-borrower, they will have to answer the same questions.

Every dollar in checking, savings, investments and retirement accounts, also known as assets to close, as well as gifts from relatives and non-profit grants, has to be accounted for. Essentially everything appearing on a borrower’s asset-radar-screen has to be documented and explained.

If you were previously a homeowner and sold your home in a short sale, or if you own a home now and plan to keep it as an investment or rental property, there are new and specific underwriting guidelines created just for you. In these cases, full disclosure of your credit and homeownership past can potentially eliminate unforeseen mortgage approval woes. For instance, Fannie Mae has a new underwriting guideline called “Buy-and-Bail,” for current homeowners’ planning on keeping their existing home as an investment/rental property. Properties not meeting the 30% equity test for “Buy-and-Bail” result in additional asset requirements to purchase a new home. Buyers with a short sale history may have to wait two to three years before they are eligible for mortgage financing again. Full vetting of your previous mortgage life will save you the dreaded we-have-a-problem call from your mortgage lender.

It all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for, not what “should be OK,” – because it won’t be.  This is where the approval process tends to go off the rails, when the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. If you send them the summary page and they ask again, don’t complain that the lender keeps asking for the same thing when you never sent it in the first place. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.

The reason the mortgage approval process is now so rigorous is simple. Avoiding defaults and loan buybacks has become the primary goal of mortgage lenders.   Higher standards are reducing loan defaults, which should mean fewer foreclosures in the future. Government data shows that less than 2% of loans originated in 2009, that were resold to Freddie Mac and Fannie Mae went into default after 18 months, down from more than 22% default rates for 2007 loans.

So when your lender requests specific documents from you, give it to them just “because they said so.”

For more information about lending and financing, please contact Bill at 978-273-3227  or by email  Bill’s Email

Mortgage Document Checklist

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What’s the Point?

Unless you have bought a home, you probably haven’t heard the term point or mortgage point.  Or maybe you have heard the term but don’t quite know what it means.  Having a general knowledge of what a point is and how it works can help you to make important financial decisions when buying a home.

The cost of purchasing a point is equal to one percent of the total loan amount which is used to buy down the interest rate when buying a home.  For example, if the lender offers an interest rate of 4% on a $250,000 loan, and you decide that the payments are too high, you can offer to pay a point (1% of the loan amount) and this would reduce the mortgage rate.  The cost of a point in this example would be $2500.  So, is it worth the investment of the $2500 to save a little money off your monthly mortgage payment?

A point will traditionally buy down the interest rate by one Quarter of a percent (.25%).  It is important to understand the cost of the point, the amount of savings on your monthly mortgage payment and see how long it will take you to break even on the costs.

Here is some simple math:

Take the cost of the point (1% of your loan amount) and divide it by the monthly savings of the rate you have just bought down with points.  The answer:  60 months plus or minus a few months to recoup this cost on average.  If you know you will be in the house for 5 years or greater, or will not touch the mortgage (refinance), then this is worth it to you.  Another example would be if the sellers would be offering to buy points to make the home sale more attractive.

On a $250,000 loan, a 30 year fixed payment at 4.00% interest rate will cost you $1193 per month.  If you purchase one point (1% of the loan amount = $2500), your new interest rate would be 3.75%. Your new monthly payment would come to $1157, a savings of $36 per month. I divide the cost of the point, $2500, by $36 (my monthly savings).  This will give me the number of months it will take to recoup the cost of my investment.  In this case it will take 69.44 months or 5.78 years before you really begin saving.

In My Opinion:

In the case of buying points, it is not a wise investment because of the time it takes to recoup the costs.   These potential funds to purchase points can be earning far more in other investments.  So, unless the seller is buying down the points for you…don’t bother!

For more information about this article, please contact me at   Bill@billnickerson.com

Bill Nickerson NMLS #4194

Understanding how your Credit Works

Credit scores were developed by Fair Isaac and company (FICO). The models created using FICO take all the detailed information about your credit report and produce your credit score using different weights and factors contained in the FICO scoring models.

The purpose of a FICO score is to show how likely you are to become at least 90 days late in making payments in the next 24 months based on patterns in your credit history, compared with patterns of millions of past customers.

Fair Isaac divides the scoring range into five risk categories.

• 780-850 Low Risk
• 740-780 Medium, Low Risk
• 690-740 Medium Risk
• 620-690 Medium High Risk
• 620 and Below High Risk or “Non Prime”

Each of the three major credit bureaus uses their own version of the FICO scoring model. Factors influencing your credit score are:

• Current or late payments
• How late the payments are
• Number of open accounts you have
• How much credit you are using in relation to how much credit you have available
• If there are serious delinquencies on your file like bankruptcy, liens and charge off accounts

Your credit score is a snapshot, in that it is developed at the time of inquiry by a credit grantor pulling your credit file. Your credit score can change with the passage of time as well as with the addition of new information to your credit file. As delinquency information in your file ages, it’s negative affect on your credit score lessens.

Credit Scoring uses the following five areas of information to calculate the score:

• Payment history 35%
• Amounts owed 30%
• Length of credit history 15%
• New credit inquiries 10%
• Type of credit used 10%

It is best to keep balances low on credit cards and other revolving accounts – maintain balances below 50 of the available credit limit. 24 is optimal. The best way to improve your score is to pay down revolving debt.

An inquiry is defined as a request by a lender for a copy of an applicant’s credit report. Inquiries remain on a credit report for two years, but credit scores only look at inquiries in the last 12 months. Your own request for a credit report to review for accuracy is not considered in your credit score.

Apply for new credit accounts only when you need them. Remember that closing accounts does not make them go away. A closed account with a poor payment history may become a more recent account because the date of activity will change. An open account with a low or zero balance is better than a closed account.

HELPFUL WEBSITES FOR YOUR REFERENCE: You can obtain your free annual credit report, without a FICO score, at www.annualcreditreport.com

To contact the credit bureaus:

Experian  1-888-397-3742   www.experian.com

Equifax  1-800-846-5279 www.equifax.com

Transunion  1-800-916-8800  www.transunion.com

DID YOU KNOW??

1. FICO scores are used not only for a mortgage and credit cards, but for auto loans, insurance and utilities.
2. Credit reports reflect charge offs or collection accounts for up to 7 years, and bankruptcies for up to 10 years.
3. You can order a free credit report annually, at no charge, without impacting your credit score.
4. Having a minor balance without missing a payment is better than closing an account.
5. Paying off an old collection may result in a drop in your credit score.
6. Consolidating credit cards increases your ratio of debt to available credit and lowers your score.
7. Using the maximum amount on a credit line can drop your score by 100 points.

For more information regarding financing or the economy, please call or email me at any time.  I can be reached via email at Bill’s Email or call me at 978-273-3227.

Bill Nickerson Training for the Pan Mass Challenge

 

Home Buying Closing Costs: What to Expect

Your mortgage lender, real estate agent, real estate attorney, or settlement agent should be in touch with you a few days before your closing settlement with the final amount of money you’ll need to close on a purchase of a home. However, in some cases, the call may come too close for comfort and may be as late as the night before your closing, so you should be prepared well in advance of the type of fees associated with purchasing a home.  We refer to these fees as closing costs.

The home buying closing costs you might expect to see include:

Attorney fee: In some states, the lender will require you to close with a real estate attorney. These fees are typically fixed and start around $650 and can go as high as $1,000, but in other parts of the country you may have to pay an hourly rate.  You can also hire an attorney for personal representation, prepare the purchase and sales and review all documents in the transaction.  This is additional and can range from $250 to $1500 depending upon the services provided.

Flood certification fee: You’ll pay this fee to have your lender determine if your home is in a federally designated flood zone. If it is, your lender may require you to purchase flood insurance before agreeing to lend you money. This will cost on the range of $25 to $50

Lender’s appraisal fee: The lender wants to make sure your property is worth at least as much as what it is lending you. The appraisal fee will vary, depending on the value of the property. In higher-value homes, you may find a lender requiring two appraisals, and you may be required to pay for both of them. Depending on the state in which you are located, the appraisal fee could be as low as $450 for a single family home and as high as $700 multifamily homes.

Lender’s credit report: Your lender will pull your credit report a few times during the loan application process to make sure your financial situation hasn’t changed. Expect to pay $35 to $100 per credit report for each person that has applied for the loan.

Lender’s document preparation fees: The document preparation fee is a charge the lender bills you to assemble and create the documents for your closing. Ever since settlement agents and lenders unbundled their fees, lenders have labeled their services and collected a fee for each. Expect to pay between $695 and $995.

Lender’s Title insurance: The lender wants to protect its investment, so it wants to make sure the property you are buying is insured and remains insured as long as the home has a loan on the property. The lender’s coverage will cost $2.50 per thousand borrowed.  When it’s time to refinance, this cost is discounted in many cases to as little as $1.50 per thousand.

Real Estate Tax escrow: In some states, the amount the lender requires of a buyer may be substantial.  Taxes are billed quarterly and semi-annual and the lender will want to hold 3 to 5 months in escrow.   You may receive money from the seller for bills that come due after the closing if they cover the time the seller owned the property. Like with homeowner’s insurance, the lender will probably require a lump sum deposit from you to the escrow account at closing settlement.

Mortgage point and loan origination fee: The origination fees are tied to the total cost of your loan and can run up to about 3 percent of your loan. If you pay a point, you should be getting a reduction of your mortgage interest rate. Whether you pay points or origination fees may be up to you. If you decide to obtain a loan with a lower-than-market interest rate, you may agree to pay points to lower your interest rate or buy down the rate.

Notary and other fees: Depending on your state, your mortgage paperwork may have to be reviewed and signed by a notary public. The notary public may charge a fee to witness your signature and verify it on the closing documents.

Prepaid interest on the loan: Usually a lender will bill you in advance for the interest on your loan from the day your loan closes to the end of the month. If you close early in the month, the amount will be larger; if you close near the end of the month, the amount will be smaller. This amount will be tied to the interest rate on your loan.

Recording fees for deed or mortgage: You’ll receive title to your home in the form of a legal document, and this document will need to be recorded with your county recorder of deeds. The mortgage will need to be recorded as well. The recording fee will vary from state to state, but you should expect to pay at least $360 in Massachusetts. Additionally, in some states, there is a mortgage tax that is based on the amount of the mortgage. For example, if the mortgage tax is 1 percent and your mortgage loan is for $250,000, the tax will be $250 to record the document.

Owners Title insurance: If you choose to purchase a buyer’s policy, and I absolutely think you should, the cost is $4.00 per thousand based on the purchase price of the home. If you only buy a lender’s title policy and then someone makes a title claim to the property and you lose the house, only the lender will get a check. Plus, if you have equity in the home, that equity will not be protected now or in the future. You need to buy a separate owner’s policy so that you will be fully compensated in this sort of situation.

Additional Items:

Purchase and Sales Review:  Most purchase and sales are provided by the real estate agents through the Greater Board of Realtors.  It is good to have these reviewed by a real estate attorney and can cost $250 to $500 for this.

Home inspection: While you should have had your own inspector go through the home you are buying early in the home-buying process, this fee will be required by your lender to make sure a newly built home has been completed. Your lender won’t want to fund your purchase unless it has sent someone out to actually see the home and make sure it’s ready for closing. This fee might runs between $250 and $500, depending on the type of new home you’re buying.

For more information regarding closing costs or mortgages, please email me at bill@billnickerson.com

Bill Nickerson, NMLS# 4194

My First Selfie…

 William J. Nickerson | NMLS #4194 | bill@billnickerson.com | 978-273-3227