Sunday, February 23, 2014

Bearer Of Bad News....

Not wanting to be the bearer of bad news, unfortunately I must report that the housing data continues to decline.  The Mortgage Bankers Association reported that applications for purchase loans declined once again by another 6.0%.  Mortgage rates have been creeping upward.  Additionally the continued harsh weather in the Northeast is also a reason for the continued struggles in home sales.  The refinance index declined 3.0% which of course is far more sensitive to interest rate fluctuations. 

The greatest concern in the MBA report is that purchase applications are down 17.0% from the same time last year.  At this point no one was expecting this.  Sentiment heading into 2014 by virtually all experts in the mortgage and real estate field predicted significantly higher volume. The good news is that real estate professionals are stating that they are seeing more activity of potential homebuyers making inquiries to their available inventory.

Housing starts is the other sector of the market that the extreme cold of January took a heavy toll.  The most recent report showed a decline of 16.0 percent to an 880,000 annual unit rate. Continuing in a downward trend were single-family homes which fell 15.9 percent to 573,000.  Condominiums were down similarly by 16.3 percent to 307,000. The South and West were by far the biggest losers in housing starts with declines of 12.5 percent and 17.4 percent respectively.

I won't say it is a bright light, but maybe we can call it a glimmer of hope.  Permits for new housing construction, which are less affected by weather, showed a smaller decline and probably more closely reflect the underlying trend for the new home market. Permits for single family homes declined 5.4 percent.  Permits for condos fell sharply dropping 12.1 percent.  Continuing bad weather for the month of February points to the season of spring as being the time when housing will snap back to where it should be.

The latest FOMC minutes indicate that board members continue to debate when and how much tapering should be done.  Several members favored continuing a scheduled tapering of $10 billion per FOMC meeting. However, two members indicated a strong desire to pause the tapering due to weakness in the latest economic data combined with continued low inflation.  A number of members commented that the recent economic news had reinforced their belief that moderate economic growth over the medium term will continue.

First time jobless claims remained stable for the prior week at 336,000.  Experts were predicting 335,000 so the report did not set off any alarm bells related to the labor markets

Next week potential market moving reports are:

  • Tuesday February 25th  FHFA Housing Report and S&P Case-Shiller Home Value Index
  • Wednesday February 26th - MBA Purchase Applications and New Home Sales
  • Thursday February 27th - First Time Jobless Claims and Durable Goods Orders
  • Friday February 28th - GDP

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Thursday, February 20, 2014

Mortgage And Improving Your Score

Today there are many homes for sale with low prices and low interest rates. Housing is more affordable now than it has been in many years. Considering the current market, why isn't everyone snapping up homes? The truth is, many first time home buyers are jumping into the market and getting in on this affordable housing opportunity. Real estate investors are also very active as they see this unique opportunity to build their wealth. The unfortunate reality for everyone right now is that even though homes are more affordable now than in many years, lenders are very picky about who gets a loan and who does not. And your credit score is one of the primary indicators of whether or not you will get approved for a loan and what your interest rate will be.
Just a few years ago a borrower with a credit score as low as 500 could buy a home. Today that score needs to be a minimum of 620 to 640. And to qualify for the best interest rates you better have a credit score in the 700's. No matter what your credit score is, you should know it. If it is not close to 750 you should resolve to get there and here are some easy tips to help improve your credit score.
Let's take a look at what information on our credit report determines your score, then we will give suggestions on how to improve in each of those areas
35% or your credit score is attributed to your payment history which not only includes actual payments to your creditors, but it includes things such as collections, judgments and tax liens. With this in mind you always want to make sure you make your car, credit card and loan payments on time. Many lenders also require verification of rental payment history, so you will want to make sure you pay your rent on time as well. By the way, a payment is considered on time if it is paid within 30 days of the due date. If you have collections, judgments or tax liens on your credit, you will have to provide proof that these were paid. If there are unpaid collections you can in many cases negotiate a settlement for less than what is owed. From a credit scoring standpoint this is almost as good as paying in full as long as it is reported as satisfied in full on the credit report.
In addition, you can make a payment arrangement for tax liens and after 12 months get those rated for your credit report which will help. Judgments are required to be paid in full at the close of a loan, and you will need to get it paid and the credit report updated in order to improve your credit score. In many cases with a history of late payments we have to say, time heals all wounds. In other words, it may just take a year or so of making your payments on time to get the credit score you need. If you have items on your credit report that are incorrect, then you can dispute those items to get them corrected with the credit bureau.
30% of your credit score is attributed to how much you owe on your credit card as a percentage of total credit limit. Let me give you an example: If you have one credit card with a $1,000 limit and you owe $750 on this card, your percentage of credit usage is 75% and your available credit is 25%. The lower the usage percentage the higher your credit score will be (all other factors being equal). There are 3 ways to improve this number. You can accomplish this by paying your credit card down as soon as possible. You can request an increase in the credit card limit. And you can also open up new cards. For the last two, you will need to exercise some caution however.
When you request an increase in your credit card, you should ask your credit card company if they can do this based on the merits of your payment history with them. If not they will create a credit inquiry which can lower your score just a little bit. In my opinion it would probably still be worth the credit inquiry deduction from your credit to get your credit limit increased. I believe that in most cases you would have a net gain in credit score, but there have been times when I've seen it drop at least in the short term. By the way, do not increase the balance on your credit card when your limit goes up or you will have just undone the improvement, but now you owe more money and still have a low credit score. Similarly, when you open up a new credit card, you end up having a couple of strikes against you which is the credit inquiry and the new credit account. More about both of these in a moment.
15% of your credit score is attributed to your length of credit history. So Let's have another example: Let's say you have 2 credit cards. You have had one of the credit cards for 5 years and the other card for 3 years. So on average your credit cards are 4 years old, and so your credit score will reflect this 4 year average length. Now if you open a new card, you reduce your average down to about 2.7 years from 4 years. So initially at least this can have the effect of lowering your average length of credit and reduce your credit score accordingly. That is one of the reasons that opening new credit is not a quick fix for bumping your credit score up. However lets take a look at it a year from now. In one year from opening the new credit card your average length would be at 3.6 so if this is part of a longer term strategy then it would probably be a good strategy to follow.
10% of your credit score is attributed to new credit, so once again you can see that opening a new credit account not only lowers your average length of credit, but it also counts against you on a stand alone basis as well. This is also why an inquiry affects your credit score as well. When there are inquiries, it is "assumed" by the system that you are acquiring new credit whether you are or not. For example, if you had your car at the dealership to be fixed and while you were waiting you were taking a look at a new car and ended up making an offer which the dealership knows you will be financing, they will make sure to run your credit (with your permission of course). So even though you end up not buying the new car, the credit inquiry is on your credit report and will slightly lower your credit score. By the way, all inquiries reported in a 30 day period from similar companies will be treated as one credit inquiry. So if you are going to be buying a car or shopping for a mortgage, try to get all of the inquiries put in within 30 days to lessen the effect of multiple inquiries.
The last 10% of your credit score is attributed to the types of credit used, or what we call credit mix. It is good to have both credit cards, car loans, mortgages and installment loans on your credit report. For most people it will take time to accomplish all of these, but beware that someone who always uses high interest rate, high risk lenders will have lower credit scores as well. I cannot mention them by name of course, but it is the lenders who would be considered a finance company, and makes high interest rate and unsecured loans for household goods that will decrease your credit score. Now it is not bad to have an account with this type of company. Many of them work with stores to offer no interest, no payments for 90 days or longer. As long as you are not using them with regularity. Once established you should be able to qualify for reasonable rate credit cards or even an installment loan at a bank or credit union with a competitive rate as well. So bear in mind as you build your credit and credit score that these factors all contribute to your overall score.
A couple of other thoughts for you. Many folks ask me what this or that will do to your credit score and unfortunately no one can tell you exactly as credit scoring is somewhat like Kentucky Fried Chickens secret recipe of 11 herbs and spices. It is a closely guarded, highly sophisticated set of algorithms that combines all the above stated factors and reduces them down to a simple 3 digit number that is supposed to represent your likelihood of paying back the loan or credit card you are applying for. You may want to connect with a lender who can assist with guiding you through the process of improving your credit score. There are also a large number of companies who will, for a price, work on your credit score for you. There are no guarantees with these services and in addition, they are usually fairly expensive and many of them are just plain rip offs, so you would need to approach this avenue with a great deal of caution.

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Monday, February 17, 2014

This Weeks Events

Let me start off with a special Valentine's Day wish to you.  Today is a day that I hope you are able to spend with that special someone in your life.  Whether it is your one true love, your best friend, a parent, or that person that you have a very special relationship with, I wish you a day of enjoyment and love.

Even though today is Valentine's Day?for those of you living in the Northeast and Mid-Atlantic states, I imagine that the one thing you may not love today is Mother Nature.  Once again these regions have been pounded with snow and ice and travel has been nothing short of treacherous.  Next week there will be a number of real estate activity reports released, however they will likely not tell the real story of what is happening in the market.  The reality of real estate activity today will come out in about 30 days and the numbers are likely to be rather deflating.

The abnormally cold and snowy weather in the east, combined with the extensive drought taking place in the west, are likely to have a significant negative impact on real estate markets.  No one yet is really making any predictions on the numbers that will be released, but the reports are not expected to show signs of an improving real estate market.

As of Friday morning the stock market begins the day 252 points higher than the beginning of the week.  There has been market volatility throughout the week.  On Tuesday investors were excited about Janet Yellen?s, comments that she strongly supports current monetary policy.  The intention is to keep the current plan for stimulus tapering in place as long as the labor market continues to recover.  Ms. Yellen?s comments indicate a willingness to adapt monetary policy to changes in the direction of the recovery.  The Fed continues to demonstrate a flexible approach to economic policy and that has investors optimistic.

Mortgage rates have increased off of their recent declines related to uncertainty in the global markets and worse than expected corporate profit reports.  You may remember that last week there were repeated reports about a global economic slowdown occurring in Asia.  Combined with weaker than expected corporate profit reports, investors fled the stock market to place their money in the safe haven of government bonds driving down mortgage rates.

The Mortgage Bankers Association reported last week that applications for purchase loans declined 5.0%.  Refinance apps remained virtually unchanged.  The continued decline in purchase applications seems to be primarily driven by the harsh weather on the eastern seaboard.

Next week there is a lot of economic data to be released which is likely to contribute to market volatility.

-        Monday February 17th ? Presidents Day ? All Markets Closed
-      Tuesday February 18th ? Housing Market Index
-       Wednesday February 19th - -MBA Purchase Applications, Housing Starts, Producer Price Index and Federal Open Market Committee Minutes
-        Thursday February 20th - First Time Jobless Claims and Consumer Price Index
-        Friday February 21st ? Existing Home Sales

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.

Friday, February 14, 2014

Some Great Reviews!

I contacted Big Valley Mortgage regarding the purchase of a home.  Michael O'Rourke sat down with me and walked me through the whole process from everything that I need in order to start the process to the final closing.  Michael even directed me to one super-lady of a realtor.

Every single step of the process was amazing, Big Valley originally not only got me a low interest rate (locked for 30 years), the week of final review...I got an even lower interest rate-well below the current 'great rates'. The staff behind the scenes were also so easy to work with (Joanne and Marilyn you guys rock).  

Buying a house is a very STRESSFUL experience, however Michael and his team at Big Valley Mortgage made it a breeze.   If you are looking or even considering buying a house and want a great/honest and friendly mortgage company, then look no further than Big Valley Mortgage.

Perry H.
Vacaville, CA

I've know Jim for over 25 years and can speak of the character & professionalism that embodies what he does.  Jim was has always been honest and forthright in his assessment of the most appropriate route to take; whether re-financing, initial loan, bankruptcy or foreclosure.

When you deal with Jim you never feel there's anything it for him because he takes the time to listen and gather the pertinent information so the decision is appropriate...for the client, not for him.  He takes his time through the process and ensures you fully understand the terms.  

I will continue to work with Jim and tell others to at least hear what he has to say before finalizing any know when you find the "right" mechanic that you can trust when you bring your car in?  Well Jim Fox provides that same feeling when it comes to mortgages.

Nick P.
Providence, RI

Tuesday, February 11, 2014

The Highly Anticipated Employment Report is In

The highly anticipated employment report is in, not to my surprise, pretty much every analyst, expert, including ADP Payroll Services, were not even close in their predictions.  Expectations were that in the month of December the employment rolls would see an addition of 180,000 jobs to the labor force.  The government released the latest report at 8:30AM on Friday announcing that only 113,000 jobs were created in December.  This comes on the heels of November?s dismal report of only 75,000 new jobs created.  The national unemployment rate declined 1/10th for the month of January dropping to 6.6%. 

The question keeps coming up again and again?How can the unemployment rate keep declining when companies are laying off more people every month than the amount of new jobs being created?  The answer is a simple one.  The labor department only counts people who are looking for jobs. 

The bottom line is if you are unemployed, but you give up on trying to find a job, you don?t count in the labor rate.  I don?t know who ever came up with this way of calculating the labor rate however I think it may be a time to change the way they do it as it is anything but a true reflection of what is really happening.

The stock market, despite the less than stellar employment report jumped at the opening bell by 80+ points.  The consensus amongst investors is that the continued weakness in the employment sector may be a catalyst for the Fed to hold off on any further tapering to the stimulus program.  Fed Chairman Janet Yellen, as well as former Fed Chairman Ben Bernake, have made it clear that the health of the labor market will continue to be the primary driver on future Fed policy decisions.

Despite the recent decline in mortgage rates the Mortgage Bankers Association reported that applications for home purchases dropped 4% in the prior week.  The extreme cold weather that gripped the nation in January, combined with the repeated snow storms hitting the Northeast, Mid-Atlantic, and Mid-West, are believed to be the primary reason for the continuing weakening housing market.  Although uncertainty in the labor market is also playing a part in the recent housing slump, most feel the weather is the primary driving force in the housing slump.

Last week the stock market declined because of growing concerns in the world markets that the global economy is slowing.  On Monday of this the ISM Manufacturing Index showed a much greater than expected slowing trend in domestic manufacturing and production.  Coming on the heels of last week?s global report, investors got spooked and the stock market tumbled over 300 points.

Next week there is not much in the way of market moving news in the United States.  That does not mean by and stretch that global data won?t play a role in investor behavior in the coming week.

?        Wednesday February 12th - -MBA Purchase Applications
?        Thursday February 13th - First Time Jobless Claims and Retail Sales
?        Friday February 14th ? Industrial Production and Consumer Sentiment

As your mortgage professional, I am happy to assist you with any information you may need regarding mortgage or real estate information.  I welcome the opportunity to serve you in any way I possibly can.  Please feel free to reach me at (707) 455-7070.