Moorings Column April 16th

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. I hope everyone had a wonderful Azalea Festival weekend and enjoyed some time with friends and family.  First off this week, let’s take a look at interest rates which have once again come down, though only by a fraction. A customer looking to purchase or refinance a home with a conventional thirty year fixed rate mortgage can expect an interest rate of 4.125%, which is down by an eighth of a percent from last week. If you’re looking for a government secured loan, then an FHA might be the way to go as those are currently being offered at 3.875%.

 

In major economic news, here’s what happened last week…and how home loan rates were impacted by it. Inflation news hit the wires, with reports on both the wholesale and consumer levels. The wholesale-measuring Producer Price Index (PPI) showed that prices remained mostly unchanged during March. Remember, inflation hurts the value of fixed investments like Bonds (including Mortgage Bonds, to which home loan rates are tied)…so the lack of inflation on the wholesale side was good news for Bonds and home loan rates. Also helping Bonds and home loan rates last week was the tame inflation data from the Consumer Price Index (CPI). The headline reading for March was right in line with estimates. When stripping out volatile food and energy, the Core CPI was also in line with estimates…but the year-over-year number was 2.3%, just slightly higher than the previous reading of 2.2%. While this raises eyebrows a bit, the Fed is still reiterating that inflation remains subdued. That being said, if the Core CPI continues to rise, bonds and home loan rates will have a tough time improving much further, regardless of other factors.

 

One key factor to keep an eye on is the labor market, as Initial Jobless Claims increased 13,000 to 380,000 for the week ending April 7. This came as a real shocker to the markets as they were expecting continuing job growth.  This marks the highest Jobless level since January, and the second highest reading for 2012. The Fed has acknowledged that job creations are short of their goals. In fact, last week Federal Reserve Vice Chairman Janet Yellen said that weakness in housing, the European debt crisis, and government spending cuts are likely to slow the pace of recovery and expansion. She did state that the Fed has plenty of stimulus tools to use, if economic conditions warrant another round of quantitative easing, which is the FED buying Mortgage Backed Securities, which will keep rates down.

 

The bottom line is that many factors will impact the direction in which Bonds and home loan rates move in the weeks ahead. The good news is that home loan rates remain near historic lows and now continues to be a great time to purchase or refinance a home during this incredible buying opportunity of low home prices, great selection, and low interest rates. . Well that’s all for this week and until next week be Blessed and Numbers 6:24-26 be on you.

Top 10 Do’s & Don’ts During The Loan Process

  • DON’T APPLY FOR NEW CREDIT OF ANY KIND – If you receive invitations to apply for new lines of credit, don’t respond. If you do, that company will pull your credit report and this will have an adverse effect on your credit score. Likewise, don’t establish new lines of credit for furniture, appliances, computers, etc.
  • DON’T PAY OFF COLLECTIONS OR CHARGE-OFFS – Once your loan application has been submitted, don’t pay off collections unless the lender specifically asks you to in order to secure the loan and we recommend that you do everything possible to negotiate deletion in exchange for payment. Generally, paying off old collections causes a drop in the credit score. The lender is only looking at the last two years of activity.
  • DON’T CLOSE CREDIT CARD ACCOUNTS – If you close a credit card account, it can affect your ratio of debt to available credit which has a 30% impact on your credit score, and also your length of credit history which has a 15% impact on your credit score. If you really want to close an account, do it after you close your mortgage loan.
  • DON’T MAX OUT OR OVER CHARGE EXISTING CREDIT CARDS – Running up your credit cards is the fastest way to bring your score down, and it could drop up to 100 points overnight. Once you are engaged in the loan process, try to keep your credit card balances below 30% of the available credit limit.
  • DON’T CONSOLIDATE DEBT TO ONE OR TWO CARDS – Once again, we don’t want you to change your ratio of debt to available credit. Likewise, you want to keep beneficial credit history on the books.
  • DON’T RAISE RED FLAGS TO THE UNDERWRITER – Don’t co-sign on another person’s loan, or change your name and address. The less activity that occurs while your loan is in process, the better it is for you.
  • DO JOIN A CREDIT WATCH PROGRAM – Your bank, credit union or credit card company may be able to provide you with a free credit watch program that can alert you to any changes in your credit report. This can be a safeguard to help you intervene before the underwriter sees a problem.
  • DO STAY CURRENT ON EXISTING ACCOUNTS – Late payments on your existing mortgage, car payment, or anything else that can be reported to a CRA can cost you dearly. One 30-day late payment can cost anywhere from 50 to 80+ points on your credit score.
  • 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’s really no reason to drop it now. Again, make your changes after the loan funds.
  • DO CALL YOUR LOAN CONSULTANT – If you receive notification from a collection agency or creditor that could potentially have an adverse effect on your credit score, call us so we can try to direct you to the right resources and prevent any derogatory reporting to credit bureaus.

April 9th Moorings Column

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. I hope everyone had a wonderful Easter holiday and enjoyed some quality time with friends and family. To start off with this week, let’s take a look at interest rates which have again risen slightly back to 4.25% for a thirty year fixed rate loan. This is still a great deal though with home prices at all-time lows right along with the rates. To put this in perspective, a two hundred thousand dollar loan at 4% interest for thirty years would have a principal and interest payment of $954. Change that to 4.25% interest rate and the payment only goes up by $29, which is hardly worth sitting on the fence for. If you are looking at purchasing a home and have found the one you want then lock in now. Waiting around for rates to lower by an eighth of a percent is just not worth it. Remember only one of two things can happen…the rate will go down and you save a few dollars, or it may go up and cost you even more.  When rates are already at some of the lowest they have EVER been…I think the latter is the more likely of the two situations.

 

In major economic news, last week’s Jobs Report for March showed that 120,0 00 jobs were created, with 121,000 private gains offsetting modest government jobs losses. This was an utter disappointment, as expectations were for something north of 200,000 job creations. The unemployment rate declined to 8.2%. While any decline in unemployment is good news, the figure does need to be taken with a grain of salt – especially in light of the significant headline jobs creation miss. The reason why: the Labor Force Participation Rate (LFPR), which removes some of the guesstimating and adjustments of the unemployment rate. That number (currently at a 30-year low) is a concern because if the LFPR continues to decline, it means we are seeing a smaller ratio of people working against the overall population. This will be another headwind to our already debt-laden government.

 

While the Jobs Report was disappointing news for our economic recovery, Bonds (which thrive on weak economic news) improved on the news, including Mortgage Bonds, to which home loan rates are tied. And of course, the ugly headline jobs creation reading also renewed the talk of another round of Bond buying (Quantitative Easing or QE3)even though the minutes from the March 13th Fed Meeting suggested there would be no QE3 unless the economy falters. Well that’s all for this week and until next week be Blessed and Numbers 6:24-26 be on you.