What’s Ahead For Mortgage Rates This Week – April 8, 2013

Last week’s economic news includes several factors that drove U.S. mortgage rates lower.

The Bank of Japan announced that it would increase its purchase of bonds by $1.4 trillion over the next two years.

This news caused yields on Japanese bonds to fall, which made U.S. bonds more appealing to international investors, that in turn increased MBS prices and caused mortgage rates to fall.

Bumpy Employment Numbers Support Lower Interest Rates

Other significant economic news involves an unexpected drop in the number of new jobs created last month.

The Bureau of Labor Statistics (BLS) Nonfarm Payrolls Report issued Friday indicated that 88,000 jobs were added in March, which fell considerably short of the expected 190,000 jobs added as well as the 236,000 jobs added in February.

Average hourly earnings remained flat against February, which indicates another stall in U.S. economic growth.

Expanding employment sectors for March included professional and business services and healthcare, while retail jobs decreased.

Jobless claims increased last week in concurrence with lower than expected jobs added for March.

New jobless claims came in at 385,000 and were higher than expectations of 345,000 new jobless claims and the prior week’s jobless claims of 357,000.

The monthly unemployment rate fell from 7.7 percent to 7.6 percent, but this isn’t encouraging news.

According to the BLS, the unemployment rate fell due to workers leaving the work force instead of workers finding jobs.

Next week, Treasury Auctions will be held Tuesday, Wednesday and Thursday.

On Wednesday, the Federal Reserve will release FOMC minutes.

Fed Continues Monthly Bond Purchases

Investors and analysts review the minutes for predicting future economic developments and also for gauging the Fed’s sentiment about how or if changes should be made to the current quantitative easing program (QE).

The current QE program involves the Fed’s monthly purchase of $85 billion in bonds and MBS is intended to keep long-term interest rates including mortgage rates low.

Retail Sales will be released Friday, and as indicated by falling job numbers in the retail sectors, analysts are expecting no growth for March in either report.

Global news concerning North Korea and the European Union economic situation could also move U.S. markets up or down depending on the nature of the news.

While not encouraging in terms of an economic recovery, these events show that the recovery is proceeding with ups and downs; this doesn’t provide investors a clear picture and may cause them to seek safe haven in bonds.

The good news for homeowners is uncertainty and low expectations of the financial markets typically help keep mortgage rates lower.

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How To Boost Your Credit Score When Applying For A Mortgage

FICO-RecipeMortgage rates and markets change constantly. Stay 100% current by taking The Mortgage Reports by email each day. Click here to get free email alerts, or subscribe to the RSS feed in your browser.

What makes up your credit score?Ultra-low mortgage rates have sped up the housing market’s recovery during the last year, with home sales and home prices both on the rise.

During the third quarter of 2012 alone, $521 billion in new mortgages appeared on consumer credit reports, marking the fourth consecutive increase in mortgage originations on a quarter-over-quarter basis.

Activity in the housing market shows no signs of slowing down, with the Mortgage Bankers Association forecasting $1.3 trillion in mortgage originations this year.

Purchase originations are projected to reach $585 billion during 2013, marking a 16 percent increase over 2012. Meanwhile, refinances are expected to reach $785 billion in the coming year.

Between low interest rates and affordable mortgage programs like FHA loans and the three-percent down Conventional 97 program, savvy home buyers should be looking to lock their mortgages before mortgage rates rise and home prices rise more.

Before you begin the process of obtaining a mortgage, though, get your financial affairs in order. The first step deals with your credit report.

What Is A Credit Report?

A credit report is a record of your financial history, detailing everything from auto loans and credit card balances to liens and bankruptcies. Generally, the information found in your credit report lasts for seven years. And, while not an official part of your credit report, credit scores are “grades” based on the report’s information.

For today’s home buyers and refinancing households, having a good credit score can mean access to lower mortgage rates and mortgage programs with smaller downpayment requirements.

However, your credit scores are used in other aspect of life, too :

  • Insurers can use your credit score to determine your premium schedules
  • Employers can use your credit score to determine whether to hire you, promote you or reassign you
  • Landlords can use your credit score to determine whether to rent you a home or apartment
  • Government and judicial agencies can use your credit score for program eligibilities and legal matters

Your credit report is your first impression in the financial world. It will often be used to estimate your level of monetary responsibility. This is one of the many reasons why keeping your credit score high is paramount.

Mortgage Lenders Use FICO Scoring Model

There are tens of credit reporting companies and you’ve likely seen their ads on TV or online. However, in the mortgage world, there are three companies which matter most — Equifax, Experian and TransUnion. Collectively, these three firms are called the “major credit bureaus” and each sells a multitude of credit scoring products.

For mortgage purposes, each sells one credit score of consequence to mortgage applicants :

  • Equifax : Equifax Beacon 5.0
  • Experian : Experian/Fair Isaac Risk Model v2
  • TransUnion : FICO Risk Score 04

When a mortgage lender “pulls your credit”, these are the three credit scores which are reviewed. Your lender will then take the middle of the three scores, and this will be your assigned credit score.

For example, if your credit scores are 620,640 and 700, your “score” is 640. As another example, if your credit scores are 700, 719 and 720, your credit score is 719. Credit scores are not rounded up or averaged.

Credit scores are called FICO scores, named after the Fair Isaac Co., a pioneer in the credit scoring space.

How To Boost Your Credit Scores

When you order a credit report, along with your credit scores, the credit bureaus often offer several ways by which you can improve your credit score.

For people whose credit scores are low, this can be a roadmap for FICO improvement. For people whose credit scores are very high, it may be extraneous information; you can’t get “bonus points” for having an extra-high FICO.

Take the credit bureaus’ recommendations under consideration, but remember that there are only a few fool-proof ways to improve your credit score.

  • Pay your bills on time, every time
  • Keep your credit card balances low as compared to your total available credit
  • Apply for store charge cards only when absolutely necessary
  • Pay doctor and utility bills when they’re due
  • Keep old credit cards open, and use them periodically

Ideally, your credit card balances should not exceed 30 percent of the card’s available balance. If you are having trouble meeting this requirement for a high credit score, ask your credit card company to raise your credit limit.

Lastly, if you’ve had a derogatory event on your credit report, avoid credit repair companies until you’ve done your due diligence. Often, time is the best healer of a “bad credit report”.

 

About the Author

Dan Green (NMLS #227607) is an active loan officer with Waterstone Mortgage. You can also connect with Dan on Twitter and on Google+.

via How To Boost Your Credit Score When Applying For A Mortgage.

What’s Ahead For Mortgage Rates This Week: April 1st, 2013

European Market Jitters Continue To Affect The US EconomyWhat's Ahead For Mortgage Rates April 1st 2013

Mortgage rates fell last week as investor concerns over the European economy grew.

Fears of growing differences between wealthier European nations and European nations needing economic aid brought higher bond prices and lower mortgage rates.

Positive news for Cyprus came when an agreement for an EU bailout was reached, but strict terms indicate that Germany and other nations are growing less enthusiastic about bailing out the banks of EU nations with shaky economies.

Meanwhile, the Italian government has not been able to agree on a coalition government, which reduces the chances for economic reform in the EU’s third largest country.

European trade with the U.S. could fall as the result of the EU’s ongoing economic challenges; this in turn would likely reduce U.S. inflation, which is good for lower mortgage rates.

Low inflation could also prolong the Fed’s commitment to its quantitative easing program that is designed to keep long term interest rates, including mortgage rates, lower.

Last Weeks Economic News Quiet, No Major Surprises

On Tuesday, New Home Sales for February were released, and came in short of investor expectations of 420,000 home sales on an annual basis.

February’s figure came in at 411,000 new homes sold as compared to January’s revised reading of 431,000 new homes sold.

Winter weather conditions are one reason for the decline in new home sales, which was the largest decline since February of 2011.

The National Association of REALTORS® released its Pending Home Sales Index for February on Wednesday; pending home sales reflected the results for New Home Sales with a reading of -0.4 percent as compared to expectations of a 2.0 percent reading.

January’s reading for Pending Home Sales was also higher at 4.5 percent.

Home prices and mortgage rates move according to supply and demand; if demand for homes falls, home prices are likely to do likewise as are mortgage rates.

But as demand for homes increases and prices rise, mortgage rates typically rise as well. Would-be buyers who have been waiting for their best deal may want to get into the housing market now, as strong signs of economic improvement are in play, but home prices and mortgage rates haven’t yet gone through the roof.

In other economic news, Thursday’s Jobless Claims Report fell short of Wall Street projections and came in at 357,000 new jobless claims against expectations of 340,000 new jobless claims.

The previous week’s jobless claims came in at 336,000 new jobless claims.

Analysts typically view a four-week rolling average of jobless claims as a more accurate indicator for the economy as jobless claims can vary widely week-to-week.

Consumer Sentiment for March was released Friday and came in at 78.6 and exceeded expectations of 72.5 for March.

The current reading also surpassed the prior reading of 71.8 percent. As consumers gain confidence in the economy, they are more likely to buy homes.

This week, the European Central Bank (ECB) meeting scheduled for Thursday and monthly Employment Data set for release Friday are among anticipated economic news events.