Take the emotion out of buying a home using good business sense

There is a good deal of emotion wrapped up in buying a home. Determining where we will spend the most intimate as well as memorable moments of our lives is no small decision. And it is no doubt one of the biggest investments most of us will ever make.

Removing emotion is no easy task. But if we make an attempt to screw our heads on as investors and looked at buying home the way we might buy a stock or mutual fund, education is the key — asking what considerations are necessary in order to have a knowledge base before acting.

If you’ve been a renter, you know there are advantages to it as well as freedom. But what about the future, and permanency? The idea of buying goes beyond renting, since you are pouring your money into a single bucket all your own — not someone else’s. Even before that final mortgage payment is made, you will have been living in your investment as physical shelter, which is why buying a home is still considered one of the safest investments around. It’s not just a piece of paper, an account number or a line on a graph.

Look at this as a business proposition first and foremost by scrutinizing the proximity and access to basic services regarding health, supply, security, and transport. That house way up on a hill may make your heart flutter, but if minimum requirements such as electricity and gas systems, lighting, waste collection, and sewer services are a concern, your little slice of heaven can soon turn into a nightmare. It’s also a good idea to inquire about infrastructural projects in the area that have the potential to increase or decrease the value of the property. Can that golf course eventually get sold to developers for more housing? Will those abandoned railroad tracks get used for future transit? Either you or your Realtor can visit the local city planning offices and pose these questions or just take a look at plans for the area.

What about your personal needs? Will local regulations or the governing entity of the neighborhood allow you to build on to the existing structure or renovate the exterior? Speaking of exteriors, building materials are not meant to last forever. Whether the home you are considering is stucco or siding, think about painting and repairs down the road. If most of the interior is carpeted, what kinds of expenses would you be subject to when you replace it all with hardwood?

It’s always recommended that you accompany the individual doing the physical inspection of the house you are considering. Try out the water pressure, check the electric meter and boards, and hold your hand up to the AC vents. If a breaker trips in the middle of the night in a snowstorm, where will you have to traipse to re-set it? This is also when you can educate yourself as to the structural system of the house, including how to access some areas you don’t need on a daily basis. Your home becomes a living, breathing entity when you think of it as a vessel that needs care, maintenance, and an occasional face-lift.

Even though a home can be staged for sale beautifully with furniture and accessories, it’s important to visually remove the temporary fluff and consider whether your own furniture will fit if you don’t intend to buy all new items. A few overstuffed chairs facing a fireplace do not equal a family of four facing a big screen TV over that same fireplace. How much room would be left over for an adequately sized sofa or sectional? And when looking at bedroom space, has the stager used mostly twin beds in secondary bedrooms? Can you turn around in the laundry room when someone opens the door to the garage?

While a home’s listing should give you most of the financial information you’ll need, it may not tell it all. The costs of things like homeowners association fees (if any) should be a concern — how well is the association managed, are there any liens or lawsuits pending against it, how often has the fee gone up and what does it cover? Does the neighborhood have supplemental taxes levied against it for expenses normal property taxes don’t cover, such as lighting and landscape corridors? Some of these extra taxes last up to 25 years from the time a home is built, and not all are write-offs on taxes.

Of course, your knowledge of the market surrounding the house you are considering is key as well. What homes have sold recently, what was included in the price and how long did they take to sell? How does this house compare to any of them, and why might it be worth more or less? It may seem like overreach, but ringing a few doorbells in the surrounding neighborhood and asking a few questions is not a bad idea when you are considering such a large investment.

And lastly, know your rights as a consumer buying real estate, whether you have professional representation or not. Read up about them online or buy a few books so that you are at least armed with a slew of questions. You’ll be glad you did a little prep work, took some of the emotion out of the equation, and looked at this as an important personal business investment.

Source: TBWS

Bill Nickerson NMLS #4194

5 Indicators of Where the Market’s Headed

5 Leading Indicators to Gauge Where
The Real Estate Market Is Heading

There are several key indicators that may predict what to expect in the weeks and months ahead. Instead of relying solely on the more sluggish statistics of home sales and pending contracts, knowing the following info will give you a much clearer perspective on the market.   

In total, there are five leading economic indicators:

#1: New listings available – On the supply side of things, signs of improvement are on the horizon.

In April, Redfin reported there was a staggering year-over-year decline in new listings of just over 50%. Now, however, both Redfin and Realtor.com have shared data from mid-May showing that annual stat has already shrunk to around 30%.

#2: Demand for homes – It’s no secret the real estate market relies heavily on supply and demand.

Thanks to states slowly opening back up for business, CNBC reported buyers have been “coming out in force,” wearing their masks for showings and ready to buy sooner than anticipated. Even in the first week of May, Redfin had noted its agents were experiencing demand that was 5.5% higher than even 2020’s pre-pandemic numbers. And just last week, mortgage applications rose 6% from the week before. Demand has also been fueled by the fact mortgage rates remain generously low, and many agents are doubling-down on using tech to show homes and close deals as needed.

#3: How long houses are sitting – As past trends would show, the longer a house takes to move, the more likely it may sell for less than its asking price.

Some sellers may find themselves waiting a bit longer to close a deal, as  Realtor.com recently found properties in the 99 largest metros across the country have been on the market for an average of 13 extra days, compared to a year ago. And even though buyers have been coming back out of the woodwork, there’s still a decent amount of would-be homeowners waiting until it feels a little safer to make the commitment.  The National Association of Realtors (NAR) did a survey where 40% of agents said their clients put their purchasing on pause for “a couple of months.

#4: Pricing – Although recent data has shown home prices are still 1.4% higher than a year ago,

Zillow has forecasted an overall dip of 2-3% by the end of 2020. While this may not be the news some people want to hear, to put this in perspective, we survived a much larger dip when the Great Recession dented home prices just over 27%. Plus, this is just one perspective. Fannie Mae has forecasted that the average existing-home price in 2020 will be $283,000, which is an overall growth of 4% compared to 2019.

#5: Job markets / unemployment rates

As with any other part of the economy, employment and financial stability influence the real estate market. As noted before, a decent segment of agents have reported their clients hitting the pause button on their home searches for a couple months. When it comes to those looking to sell, it really comes down to their personal situations. Some may want to stay put to avoid struggling to find their next abode, others may need the cash and/or want to shed having a monthly mortgage payment lingering over their head.

The market is still active. Your clients don’t have to sit on the sidelines while rates are at all-time lows. Contact me today to see how we can work together to help your clients match with a mortgage that meets their current needs, while supporting their goals for the future.

Bill Nickerson | Senior Loan Advisor | Flagstar Bank | Email | Bill’s Website

1500 District Avenue, Burlington MA | NMLS #4194

Can you still purchase and negotiate a home during this time?

3 Key Things To Know When Purchasing        Property In A Pandemic

While the ongoing pandemic has created a lot of uncertainty within industries and households alike, one thing is for sure:

Over the last couple months, the entire world has shown an astonishing ability to adapt and get things done. Technology (ex. virtual tours) has allowed agents and clients to continue working together.

If you have clients looking to make a home purchase right now, I’d like to share three key points you can guide them on during this time.

1. “How do I negotiate an offer right now?”  Empathy and awareness are important. While sellers might be open to lower offers during this time, most people won’t want to deal with someone they feel is trying to low ball and take advantage of the situation. Help clients understand the value of the home they’re interested in, and help create a reasonable offer.

2. “Understand a longer closing period is likely” For now, going straight from getting that offer accepted to the closing table is no longer the norm. With social distancing being a top priority, many of us are shifting to remote work. Clients should know that closing may take longer than the usual 30 days, while appraisers, home inspectors, and repair contractors adjust their workflow and availability.

3. “Waiting for loan rates to drop may backfire” Due to COVID-19, rates and investor guidelines are changing on a day-to-day basis. Because of this, locking in current mortgage loan rates instead of floating them to hope they go down further may be the wisest choice for clients, right now. With rates already at historic lows to begin with, this also locks in the underwriting guidelines at the same time so clients aren’t affected by subsequent changes.

By locking in a mortgage loan rate today, your clients can rest assured they’ll have a rate (and loan qualifications) that won’t budge due to changes in the market.

Additional Tip: Encourage your clients to over-communicate with their lender. Once again, the credit markets are shifting rapidly right now. It’s more important than ever for your clients to be working closely with a mortgage professional like me that can help keep them in the loop, find and secure the best financing for their current situation (and future goals), and swiftly navigate the closing process.

Contact me today to discuss how we can work together to help your clients negotiate an offer for their dream home during this time!

Bill Nickerson | Senior Loan Advisor | NMLS 4194

Cell: 978.273.3227 | 1500 District Ave |  Burlington, MA  01803

Bill’s Email

Knowing the difference between a buyer’s and seller’s market is a good idea

There is one verse missing from the famous and well-worn song Turn, Turn, Turn written by the Byrds back in 1962. The one that should be added is “there is a time to buy, a time to sell…” Realtor’s Terri Williams likens it to a card game (which was also a song) about knowing “when to hold ‘em and when to fold ‘em.”

Buyers’ markets and sellers’ markets are simply part of the economy journey, reflecting not just what is happening on a national level, but also what happens depending on supply and demand. They might also reflect tax laws and consumer confidence. It’s a mixed bag. When it’s someone’s “market,” that means the market favors them. So a buyer’s market means it’s a great time to consider buying. A buyers’ market usually means a period of six months or longer where prices steadily soften. Inventory usually rises, and interest rates drop to fuel the market. The bigger the inventory, the more negotiating there will be, including asking for perks such as help with closing costs, a credit in escrow for a new paint job, etc. It may also mean a quick closing if you need the place right away.

So how does this affect sellers? It’s not a happy time for them. It takes longer for homes to sell and hoping to get the price the seller thinks their house is worth is often a pipe dream. They can stack the odds for it, however by making sure their home is move-in ready and shows well both in person as well as in photos.

 

For some time now, it has been the reverse of this. With little inventory, sellers have been reaping the rewards of the market with multiple offers and naming their terms. That is, however, now changing according to a recent CNBC article, which says that consumer sentiment in housing improved in August and that they believe mortgage rates will keep dropping. Say one Dallas-based real estate agent: “It’s not a seller’s market right now. Now is not the time for sellers to put out these crazy prices. Appraisals have gotten a lot harder, and buyers are a little more cautious. They’re more willing to take their time.” The article goes on to say that while mortgage rates are low, buyers are becoming more cautious. With competition cooling, sellers can no longer command any

price.

“Unfortunately, much of the lower interest rate environment can be attributed to global economic uncertainties, which appear to have dampened consumer sentiment regarding the direction of the economy,” said Doug Duncan, chief economist at Fannie Mae in the article. “We do expect housing market activity to remain relatively stable, and the favorable rate environment should continue supporting increased refinance activity.” CNBC writer Diana Olick agrees that home prices are still higher than they were a year ago, but the gains have been moderating.

Source: Realtor, CNBC, TBWS

Bill Nickerson NMLS #4194

As-Is; What does it really mean in a Real Estate transaction?

When Billy Joel wrote the song Just the Way You Are, it wasn’t about buying a house. It would be too unromantic to say, “I’ll take you as is.” But that’s what many sellers are stipulating when they list their homes.

Those few words can have a significant impact on your transaction if you are the buyer. In a typical sale, after the buyers do all their inspections, they’re allowed to negotiate the recommended repairs with the sellers. It’s a “push-me-pull-you” kind of thing. The sellers will agree to have some portion of the work completed by a qualified professional or, alternatively, they will agree to give the buyers a credit towards the cost of the work.

That all changes when you buy a home in “as-is” condition. In real estate terms, a home that’s being sold as-is essentially means that you’re willing to accept responsibility for any work that needs to be done to the home.

This does not mean you have to skip inspections, however. You still have the option to do inspections for your own benefit, but the information you glean will be informational rather for negotiating purposes. That being said, it’s wise to do the inspections to understand what you’re in for — a new roof? HVAC system needs to be replaced? If you find that the house needs more work than you can handle, you’ll have the option to back out of the deal.

By now you may wonder why to consider an as-is purchase at all. The one big benefit is that you can usually get it for a better price. Forbes’ Tara Mastroeni writes, “Since the sellers are unwilling to negotiate on repairs, they’ll often price the home lower than would be expected in order to make their property seem more attractive to potential buyers.” She goes on to say that the other benefit is that you’ll have more control over any repairs done to the home once you’re the homeowner. “In a typical sale, the sellers get to choose who does the repairs that they’ve agreed to make. In this situation, you’d be able to hire professionals that you trust.”

As for reasons NOT to buy an as-is condition home? Risk. Even if you do your inspections, that home that took your breath away at first sight might end up costing more than expected and, in this case, you’d be the one responsible for footing the bill.

If you are on the selling end of the equation, you’ll need to educate yourself before listing a home as-is. Many homeowners assume that selling as-is relieves them from all the general obligations that come with the sale of a home, including unloading the property for whatever price they can get while avoiding the need to talk about or disclose any issues with the home. This is where they’d be wrong. Disclosure still rules, but the terms of disclosure rules can vary from state to state.

Listing agents can often become the fall-guy in as-is transactions, as they are held to a higher standard when it comes to disclosing a home’s defects. This is due to the Consumer Protection Act (Chapter 93A). MaxRealEstate’s Bill Gasset says this means, “Realtors have an obligation to disclose any fact that could influence the buyer not to enter into a real estate transaction. For example, if a real estate agent knows that the seller’s basement floods every spring, this is something a Realtor has to disclose.” As for what might stand up in court if a buyer backs down, it can become a he-said-she-said conundrum.

Gasset lists examples of issues a real estate agent must disclose to a prospective home buyer, such as evidence of a structural defect like a major crack in the foundation, the appearance of mold in the home, termite damage, roof leaks, high radon levels, known plumbing or electrical issues, obnoxious noise levels and especially any legal issues such as a cloud on the title.

As for the issues a home has that are not evident or lie beneath walls and floorboards, real estate agents do have a duty disclose if they discover some problem on their own or the owner lets them know. No secrets allowed. Gasset says most real estate companies ask sellers they are representing to fill out a document called a “Sellers Statement of Property Condition” — a report that outlines what an owner knows and doesn’t know about their home.

So after all this information about as-is listings, why would sellers opt NOT to do this? Simple. There is a negative connotation with buying a home as-is. “Buyers will low-ball you,” says Gasset. “Under the assumption that your home has serious defects, the buyer will bargain with you like you are desperate. You can expect offers that are probably less than what you want, or what your home is worth.”

You’ll also have to work harder at justifying your sales price. “Because buyers will be coming into the transaction with so much negative baggage, it will be difficult to break through the assumptions to show that there are plenty of reasons why your home is desirable.”

Unless selling homes in your area is as easy as fogging up a mirror, you may also drive away a lot of potential buyers with an as-is stipulation. “Even if you are in a position where you want to put minimum effort or money into the home to make a sale, you could still benefit from avoiding the as-is designation in the listing,” says Gasset. “Let buyers come and make offers, see how you feel, and go ahead and turn down requests to make repairs if you feel it is the right choice.”

Sources: Forbes, MaxRealEstate, TBWS

 

Bill Nickerson NMLS #4194  | 978.273.3227  | Email | Website

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

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 

Is It Impossible to Get a Mortgage Loan?

The Challenges:

With the numbers of recent foreclosures, lenders are having to re-purchase defaulted loans, often for minor technicalities. Losses incurred by some companies have forced them out of business.

As a result, not only have lending rules tightened, but underwriters are also being forced to follow them to the letter and beyond.

The Solutions:

Advance preparation and the right documentation will help streamline the process.

Your Money: All necessary funds must be verified, and deposits must be documented. Make copies of all checks and deposit slips.

Your Debts: Avoid delays by refraining from applying for or opening any new credit accounts.

Your Income: Expect verification through paystubs, written and verbal confirmations, tax returns, IRS transcripts, etc. All new employment or forms of variable income beyond regular wages (bonus, commission, alimony, dividends, etc.) are subject to rules of history and continuance. Do not depend on this income until we discuss its acceptability.

Your Credit: Score requirements have increased. If you’re not already, you need to be extra mindful of managing your debts. To help protect your score:

• Do not close old or unused accounts.
• Do maintain high lines and low balance ratios.
• Do not transfer balances to a brand new card (at least not before buying or refinancing).
• Do not use your extra cash to pay off debt. Sometimes, it’s better to have the cash than slightly lower balances.

Other factors can be at play, too, but the most important thing to remember is that it’s never too early to seek personalized advice. I work with mortgage loans every day, and I’m here to help you prepare so you can sail through the process when the opportunity is right.

Financing is still abundantly available. It simply goes most easily to those who plan ahead.

Bill Nickerson | NMLS #4194 | Mortgage Financial | 10 Elm Street, Danvers MA |  978-273-3227 | bnickerson@mfsinc.com | http://www.billnickerson.com

LendUS LLC, DBA Mortgage Financial is a Residential Mortgage Licensee. Massachusetts Mortgage Lender and Broker #MC1938, Licensed by the New Hampshire Banking Department License #5593-MB. Vermont Lender License #6207, Maine Supervised Lender License #SLM3129, Connecticut Lender License #MLD476, Florida NMLS License #MLD1178, NMLS #1938 – Equal Housing Lender.

 

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

Apply for a Mortgage with Bill Nickerson

Hi, My name is Bill Nickerson and I am a Senior Loan Advisor with Flagstar Bank based out of Michigan.  I have been providing residential mortgages since 1991. I grew up in Acton, Massachusetts, My Father was from Concord and my Mother was from Boxborough and we settled in the middle.  

One of the steps in preparing yourself for home ownership is to obtain an approval from your lender or bank.  This process involves filling out a mortgage application and this can be done online, in person as well as over the phone.

This process is done without identifying a property, we would use a range of purchase prices with your down payment to create payments that you are comfortable with.  It is important to understand that it is not what you are approved for, but what you are comfortable paying each month while carrying your traditional living expenses.  You will want to develop a long term plan, 5 to 10 years of what your goals will be with home ownership.  This will help you with budgeting and planning for the size of home you that will best suit your financial needs.

In addition to the application, we will be looking to verify your income, assets and debts through pay-stubs, bank statements and pulling your credit.  Once we have these items in hand, the approval process will take about an hour to confirm this information and provide you with an official approval letter. Here is a detailed list of the items needed for your approval.

 I work closely with your real estate agent and real estate attorney to help coordinate your offer and the purchase of your new home.

To apply for a mortgage, you can click here Apply Online, once completed, I will receive an email alert and will begin the process immediately for you.

For more information on home ownership, to make an appointment for a consultation, feel free to call or email me anytime.

Bill Nickerson NMLS #4194

Flagstar Bank

1500 District Avenue, Burlington MA 01803

www.billnickerson.com

978-273-3227