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 

 

 

The true costs of Renting vs. Owning

There’s more to comparing the costs of renting and owning than the dollar cost of payments.

Even with numbers like these, some still say renting is better:

“Investing in a home is riskier than renting.”

No risk, no reward. Besides, even studies conducted by the Federal Reserve show that owning can provide a net worth that is from several to hundreds of times higher than that of renters.

“Home values have dropped in recent years.”

Which is one reason why ownership may now be less expensive than renting. As well, recent price trends in many areas have reversed, and values are once again on the rise.

“The tax deductions aren’t worth it.”

Some people benefit from claiming deductions for mortgage interest and real estate taxes. Others find a standard deduction more valuable. Even if you exclude the tax benefit, the real cost of owning can still be less than renting.

Equity for you or equity for your landlord?

With more or less equal payments, owning will always have an advantage in that you’re paying down principal and earning equity in your own home rather than the landlord’s.

Still renting and want to explore the path to ownership? Reach out, and we’ll be happy to help.

Factors used: $500,000 purchase price, 20% down, $400,000 30-yr. fixed loan at 4%/4.25% APR. Principal & Interest payment = $1909.66, taxes = $520.83/Mo. (1.25% of value), insurance = $120.83/Mo. ($2.90 per $1000 of loan amount) & maintenance = $208.33/Mo. (0.5% of value). Tax deductibility at 28%. Tax savings, principal paid and appreciation averaged over a 5-year period. Always consult with your tax adviser for tax advice specific to your situation. This is not a Good Faith Estimate nor an offer to lend. Rates, prices, taxes, insurance, etc., are subject to change at any time. APR calculations are based on closing costs of 3% of the loan amount. Actual fees can be less.

Bill Nickerson NMLS #4194 | Email | 978.273.3227

William J. Nickerson

Don’t lose that bid!!

In the housing market, the best deal doesn’t always come with the lowest price.

Price vs. Payments – If you’re financing your purchase, you’ll probably never come close to paying the actual price. You’re making a comparatively small down payment and then paying interest on the loan until you refinance or sell. Yes, you will have a higher payment if you pay more for the home, but an extra $10,000 of mortgage money can add less than $50 per month on a low-rate, 30-year loan.

Relative Prices – Our natural tendency to pay as little as possible is not as meaningful for an investment, such as a home, as it is for a consumable. In this case, what you pay now can affect your sales price later. There may be little difference in total earnings if you pay less and sell for less or pay more and sell for more.

Influencing Value – For appraisers, the last sale or “comp” in an area sets the value for similar homes. Whatever you pay helps to establish what your home and comparable properties are considered to be worth.

Setting the Trend – If you pay less for your home than was paid for the last similar home, you may be contributing to a downward price trend, which can be difficult to reverse. Conversely, helping to maintain a trend of price appreciation can end up paying you back many times over.

One Chance – No two homes are ever exactly the same. Even when structure matches, your land, your view, your address and your immediate neighbors will always be different. You truly may have only one chance at just the right house. Industry professionals have all seen buyers lose out on what they really wanted. We don’t want that to happen to you. Nor do we want you to pay more tomorrow for something less than what you could have had today as a result of increasing prices and rates.

Reach out, and we’ll be happy to help you weigh your options for the home you would really love to own today.

Bill Nickerson   NMLS #4194  | 978.273.3227 | Email: bill@billnickerson.com | Web: http://www.billnickerson.com

Winter, it’s only a state of mind.

Providing Residential Mortgages since 1991

The Dreaded Blank Page

Having your bank account statements in order and avoiding the deposit traps will help assure a smooth mortgage application and approval process. Follow these simple steps and remember, if you have a question, just ask me!!

• Document the source and purpose of deposits not clearly identifiable as being from your employer. If a deposit does not match up with your pay-stub, we will need to show where it came from.                                                                    
• Make copies of all checks and deposit slips and keep them together in case they’re requested.
• Track transfers, too. We’ll need statements for both accounts involved. If it is a gift from a family member, please consult with us for the proper process to follow.
• Don’t deposit currency and checks together, as this will be hard to document. It’s best not to make cash deposits unless you can clearly document the source of the funds.

Following these steps will make it easy to prove that funds going into your account are not borrowed. Even private loans have corresponding payments, so underwriters have to be certain to account for all debts.

The Dreaded Blank Page of the Bank Statement

You may be tempted to throw away a numbered page on your statement if it is blank or contains an advertisement. Unfortunately, if the other pages are marked 5 of 8, 6 of 8, etc., the underwriter can’t be sure a missing page 8 of 8 had no important information.

To be sure there’s no delay in processing your loan application, please save and provide ALL numbered pages of your bank and other asset statements, even if they’re blank.

Your Down Payment and Reserves must be in an account

Mattress Money or any “cash on hand” is not acceptable. All funds must be “seasoned,” which means your money needs to be in an institutional account (bank, credit union, brokerage, etc.). You will need to provide all pages of up to three months of consecutive statements for proof these funds are yours.

Gift Funds are OK with a signed “gift letter” (a form we provide) and evidence of the donor’s ability (a statement showing sufficient funds). Later, we’ll need copies of the check, deposit slip and account statement to show the transfer into your account.

Assets Being Sold, such as a car, boat, collectible or anything of value you are selling, require proof of ownership (such as a registration or title) and evidence of value (blue book value or appraisal). After the sale, provide copies of the receipt and the check and deposit slip showing the transfer of funds to your account.

Other Examples include loans from employers or against retirement savings, grants, inheritances, proceeds of sale from other property, loan paybacks and winnings. Be prepared to show the source of funds, evidence of transfer into your account and any supporting documentation of value, terms, service provided, etc.

TIP: If you have time and want to minimize paperwork, consolidate all funds into one account at least two or three months prior to closing. Save any and all evidence of transfers and deposits and keep activity to a minimum.

Never hesitate to ask questions when you’re unsure about what will work and what will not.  Mortgage Guidelines are updated and changing constantly.

 

 

Bill Nickerson

Using Gift Funds for your Mortgage?

Getting Gift Funds for the purchase of your new home?  Whether the funds are for the down payment, reserves or even closing costs, here is what you need to know.

The “Donor” of the gift must be a family member, fiancé or domestic partner. They must prove they have the ability to provide you with the gift by providing a copy of their bank statement, a copy of the canceled gift check and/or a signed letter from their bank saying the funds are available.

The “Gift Letter” is a form we will provide. The donor will need to complete it with basic information and a signed statement that the funds are a gift with no expectation of repayment.

The “Transfer” must be documented carefully. Make a copy of the gift check and deposit slip or of confirmation of the wire transfer. Deposit the gift in the account you’re already using for verification of funds to close. DO NOT combine this deposit with any other incidental deposits. Provide either an online update or the next account statement to show that the deposit cleared into the account.

Some programs allow for the entire down payment to be in the form of a gift. Others may require that you have at least 3 or 5% of the purchase price from your own funds. As these rules can vary or change at any time, never hesitate to consult with us for the specifics as they relate to your transaction.

While the documentation requirements may seem excessive at times, please remember that the underwriters are simply following the rules to assure that your down payment is not borrowed and that any allowable gift funds are coming from acceptable sources.

Always call or email with any questions you may have.  The more information you have, the easier your purchase transaction will be.

Bill Nickerson

A Commitment Letter to shop for a home

As you know, lending guidelines are like the weather in New England. Wait 5 minutes and they could change! With that introduction, why would you bring your clients out to see homes without having a full commitment letter from the Lender? Not a Pre-Approval… Not a Pre-Qualification letter, but a full commitment letter from US to your Client.

With our Advance Approval, this gives you the security of knowing you have a commitment letter even before you start your search for a home.

Once your client has the necessary income and asset documentation, our in-house underwriters (yes, as in all loans are written and funded in our Tewksbury office) will issue a commitment letter within 48 hours.

With Mortgage Financials Advance Approval, this removes all the stress from the transaction, allowing your clients to focus on purchasing the home of their dreams.

No Surprises, No Last minute conditions.  As always, we can close loans in under 30 days!

Mortgage Financial | Senior Loan Officer | NMLS #4194 | Phone: (978) 273-3227 | bnickerson@mfsinc.com | http://www.mfsinc.com/bnickerson |

Bill Nickerson

Why it is so important to get Pre-Approved!

It’s always been a good idea to get pre-approved for your mortgage loan, but lately, it’s become even more important.

Why should I be pre-approved for a mortgage loan?

In recent years, mortgage guidelines have been tightened. Documentation requirements have been expanded and followed more closely. A pre-approval gets you through the process and uncovers potential pitfalls long before you become obligated by a contract to purchase.

What advantages will I have once pre-approved?
You’ll be certain about the price range that’s best for you. You’ll know how much cash you’ll need to close, and you’ll know your maximum monthly payment. Understanding your limits will help you negotiate with confidence. Plus, since sellers like a sure thing, you’ll have an advantage over buyers who may not have been through the process.

How long is the pre-approval valid?
Your pre-approval is typically good for the “shelf life” of the documents used. These will include a credit report, pay stubs, bank statements, W2s, tax returns, etc. The usable life of these documents will vary, yet it’s usually safe to say that your approval is good for up to three or four months. During this time, it pays to file all important financial documents so they’re readily available for future updates.

What if I change my mind?
That’s perfectly fine. There’s no obligation to purchase a home or use a particular loan program once you’ve been pre-approved. In fact, pre-approval simply helps to assure you know exactly what’s involved, that you are comfortable in a particular price range and that you are truly ready to make your move.

The process of purchasing a home is easier when you have financing in place before you make an offer. We’re here to help get you started, and it’s never too early to do exactly that. Give me a call when you’re ready.

Bill Nickerson | NMLS# 4194 | Mortgage Financial | bnickerson@mfsinc.com |   | 978-273-3227 |  10 Elm Street, Danvers MA 01923 |

Do You Know How To OPT OUT?

In the recent events that took place with Equifax that compromised 140 Million consumers. It is extremely important to know how to OPT OUT of any of these solicitations so that you don’t become one of the statistics.

 The bad news: It is common practice for the three credit repositories (Experian, Equifax and TransUnion) to compile and resell consumer data to marketers. In fact, they make a lot of money sharing our names, addresses and other demographic information. The ironic thing about these “pre-approved” offers is that the marketers do not know enough about you or your credit to approve you without a full application – so you’re not really “pre-approved” after all.

The good news: You can remove your name from all of this. Under Federal law you have the right to “opt-out” from all pre-screened offers by calling (888) 567-8688 or going online to http://www.optoutprescreen.com  A 1996 amendment to the Fair Credit Reporting Act required that the credit bureaus provide an opt-out opportunity for consumers who do not want their names and addresses sold to credit grantors for solicitations. Consumers can and should take advantage of the right.

If you aren’t tired of shredding pre-approved credit card offers and don’t mind having your personal information shared with third parties, there is another reason to opt-out of prescreened offers: identity theft. Imagine a “pre-approved” credit card offer going to a previous address, whose hands is this application falling into? Eliminating the risk can stop ID theft before it starts.

You can go onto the FTC website for further information about opting out at http://www.ftc.gov. By opting out you will no longer receive pre-approved credit offers. If you are interested in learning more about how the credit game works and how you can maximize your credit scores, I recommend picking up a copy of The Credit Road Map at http://www.Amazon.com or http://www.TheCreditRoadMap.com.

I hope you have found this information useful and informative. If I can ever be of service to you or your friends/family, please don’t hesitate to contact me anytime.

Sincerely,

Bill Nickerson

Mortgage Financial | Senior Loan Officer | NMLS #4194 | Phone: (978) 273-3227 | bnickerson@mfsinc.com | http://www.mfsinc.com/bnickerson |