7 Ways To Protect Your Credit Score For Better Mortgage Rates

As mortgage lenders tighten approval standards   in Minnesota and nationwide, the importance of a good credit score is rising.  Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.

In the 3-minute piece, the NBC Today Show talks about 7 ways that homebuyers ruin their credit -- often by accident.  Some of the highlighted mistakes include:

• Closing open credit cards
• Making appliance buys on credit prior to closing
• Asking creditors to lower credit balances prior to closing

In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores.  Below 740, though, every 20 points adds to the damage.  Watch the video and apply what you can to your own situation.  The more you know, the more you can save.

The January 2010 Jobs Report May Lead Mortgage Rates And Home Prices Higher

On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls data from the month prior. The data is more commonly known as "the jobs report" and it swings a big stick on Wall Street.

Especially now -- many analysts believe job growth is tightly linked to the future of the U.S. economy.

Therefore, when January's jobs report hits the wires at 8:45 AM ET tomorrow, Plymouth home buyers would do well to pay attention. A net job reading that is much higher (or lower) than Wall Street's expectations can make a serious change in home affordability.

Wall Street expects that the economy added 13,000 jobs last month.  It would mark the second time in 3 months that the jobs report showed a net monthly gain.

In November 2008, the economy added 4,000.

Jobs matter to the economy for a lot of reasons, but one of the biggest is that when Americans are working, Americans are buying and consumer spending accounts for 70 percent of the economy.

Job growth spurs the economy and draws money to the stock market. Unfortunately for rate shoppers, that kind of stock market growth happens at the expense of the bond market which is where mortgage rates are made.

Good jobs data usually means higher mortgage rates.

Also, job growth can lead to higher home prices. This is because working homeowners are less likely to default on a mortgage versus non-working homeowners.  In this way, job growth helps hold foreclosures to a minimum which, in turn, suppresses the housing supply.

Less supply means higher prices for home buyers.

Mortgage rates are idling this morning in advance of tomorrow's data.  If you're shopping for a mortgage rate, the prudent play may be to lock your rate before the jobs data is released.  A jobs figure that's higher than the 13,000 expected could cause rate to rise sharply.

Pending Home Sales Predicts A Stronger Spring Market

The Pending Home Sales Index rose slightly in December, climbing 1 percent from November.

A Pending Home Sale is a home that is under contract to sell, but not yet sold. It's a figure compiled by the National Association of Realtors® using sales data from over 100 regional listing services and more than 60 large brokerages around the country.

Because each pending sale is a true measure of sales activity, the Pending Home Sales Index is purported to be the most reliable forward-looking indicator for housing. 

Recent data supports this hypothesis.

After Pending Home Sales plunged 16 percent in November, Existing Home Sales fell by 17 percent in December.  Based on the most recent Pending Sales Index, therefore, we can expect January's closed sales to be similarly level.

For home buyers in Plymouth , this is all a bit of good news. Home prices are based on the supply-and-demand balance that exists between buyers and sellers.  When buyers outnumber sellers, like they did through most of 2009, home supplies dip and, in fact, the national home inventory nearly halved during the 12 months ending November 2009.

With fewer homes for sale, multiple-offer situations were almost commonplace and home values rose as result.

Activity has since slowed, however, and fewer buyers are in today's market. The supply-and-demand equation has shifted back some. In December, home supplies rose for the first time in 7 months and January will likely show the same.

The net result: Home buyers have more homes from which to choose and that can create negotiation leverage for better prices and better concessions.

With mortgage rates still low and a looming deadline on the homebuyer's tax credit, market activity should be strong between now and April.   Take your time and bid right. And when you're ready, be ready. The best deals likely won't last.

 

Simple Real Estate Definitions : Short Sale

A "Short Sale" is when a home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.

By way of example, a Short Sale may be appropriate for a Minneapolis home seller whose mortgage balance is $250,000 but whose home wouldn't sell for more than $220,000.  Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.

Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a mortgage loan.  Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.

For this reason, Short Sales are sometimes considered "the economical alternative" to default.

The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone -- speaking with a real estate agent about the proper protocol is usually the best place to start.  And sellers should be aware of how a Short Sale on their credit can impact future borrowing.

Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.

What's Ahead For Mortgage Rates This Week : February 1, 2010

In a news-heavy week, mortgage markets improved last week, adding to a 3-week rally.

But, given last week's data and domestic story lines, it's surprising that rates actually fell.

1. The Federal Reserve said the economy continues to strengthen
2. Consumer Confidence pushed to a 2-year high
3. 4th Quarter domestic output exceeded Wall Street's expectations

Usually, events like these draw money away from the bond markets and into the stock markets and Wall Street preps for better corporate earnings. The movement pressures mortgage rates to rise.

Last week, however, different stories trumped the headlines including a report from Standard & Poor's that said U.K. banks are no longer counted among the world's most stable.  This research, in particular, triggered a flight-to-quality among investors that pumped the U.S. dollar and sparked new demand for mortgage bonds.

It's one reason why we ended the week on a rally and it just goes to show how unpredictable mortgage rates can be.

This week figures to be a challenge, too.

First, we start the week with key inflation data.  When inflation runs hot, it's usually bad for mortgage rates.  Inflation is expected to be tame, however -- a point the Fed made several times in its press release last week.  That said, inflation data is closely watched by markets and can make a big impact on rates.

Then, on Wednesday, ADP releases its private sector job report.  The ADP data is a precursor to the government's own Non-Farm Payrolls report which is due to hit Friday.  ADP is expected to show a net loss of roughly 85,000 jobs.  Depending on where the actual numbers comes in, mortgage rates could wiggle a bit.

If the ADP report shows much fewer than 85,000 jobs lost, expect mortgage rates to rise.  The same is true for Friday's job report.  A miss on expectations will cause mortgage to ratchet higher.

Since peaking on the last day of December, mortgage rates took a slow, steady descent through January. They've have taken back close to two-thirds of December's overall losses.  This week, rates could fall some more, or they could bounce back up.  The most prudent time to lock would be prior to Tuesday's closing. 

After that, the respective jobs reports will take over and rates could go either way with force.