Credit Myth #3: A high credit score can make up for a low credit score

After spending over 16 years in the mortgage lending industry I have identified seven myths that consumers commonly hold regarding their credit score.  Over the course of the next few weeks I am going to breakdown each myth and help you better understand how your credit scores are determined so that you can achieve a better outcome for your next loan application.

The third myth is that a high credit score in a joint loan application can make up for a low credit score.  The reality is, mortgage underwriters use the lower of the two applicants’ credit scores when evaluating a joint loan application.  It doesn’t matter if the higher credit score applicant has perfect credit or is only marginally higher.  The underwriter will use the lower of the two scores in determining if the application can be approved and in pricing the interest rate.

Sometimes it may be possible for the applicant with a higher credit score to qualify for a loan independent of the applicant with the lower credit score.  In that instance it may make sense to complete the loan application in the higher credit scorer’s name only.

Please contact me today to learn more about how your credit will impact your next home loan process.

As job growth slows mortgage rates improve

As you read this take a quick look around.  Do you see a few things that were ‘Made in China’?  On this day in 2001 China joined the World Trade Organization.  Currently President Trump is working to resolve trade tensions which are helping to contribute to lower mortgage rates.

Mortgage Rates

Home loan rates have benefited from recent weakness in the stock market.  One of the major factors contributing to stock market weakness has been the lack of progress on trade talks with China.

There are reports that progress is being made but for now key differences remain.  If and when the US and China reach a trade deal we may see the stock market rally which presumably would cause mortgage rates to rise.

Job growth declining

Last Friday’s all-important jobs report showed that 155,000 new jobs were created in the previous month.  This was less than the 190,000 that were expected.  The trailing three-month average has decreased to 170,000 which is the lowest of 2018.  Some economists are predicting an economic slowdown for 2019-2020.

Inflation Sensation

Ultimately inflation is the key driver of interest rates because if a lender forecasts that the purchasing power of money repaid in the future will be diminished they will charge a higher interest rate.

The Labor Department reported earlier today that prices at the wholesale level of the economy (Producer Price Index) increased by 2.7% last month when you strip away volatile food & energy.  This is a modest increase from last month.

Tomorrow the Consumer Price Index will be released.

Technical Signals

Mortgage rates are .375% better than they were a month ago.  It appears to me that the rally lower has lost steam.  I think the risks of mortgage rates reversing higher outweighs them improving so recommend locking.

 Current Outlook: locking

Credit Myth #2: Having your credit report pulled will ruin your scores

After spending over 16 years in the mortgage lending industry I have identified seven myths that consumers commonly hold regarding their credit score. Over the course of the next few weeks I am going to breakdown each myth and help you better understand how your credit scores are determined so that you can achieve a better outcome for your next loan application.

The second myth is that having a lender pull your credit report will ruin your credit score. It is true that credit inquires will reduce a consumers credit score. For each consumer the impact will be different, but for most the adverse effect is very small. In fact, according to THIS ARTCILE one credit inquiry will only reduce a person’s score by less than five points. Take a moment to watch this short video to learn about the special exception that applies to the mortgage industry pulling your credit:

Please contact me today to learn more about how your credit will impact your next home loan process.

Is a recession on the horizon? Fear drives mortgage rates to multi-month lows

I hope you took time to celebrate National Roof Over Your Head Day on December 3rd!  I showed up to work and helped people get a new roof over their heads so I’m feeling good about my contribution.  

Mortgage Rates

Mortgage rates continued to improve last week.  They are currently at multi-month lows.

Yield curve

As long-term rates improve the short-end of the yield curve is basically unchanged.  The difference in yield between the US 2-year & 10-year treasury notes is only .015%!  It appears that the yield curve may invert in the coming months.

Going back many decades every time the US yield curve has inverted the economy has gone into recession shortly thereafter.

Housing Prices

Corelogic released its monthly Home Price Index today.  It showed that homes appreciated by +5.4% nationwide in the past year.  Oregon homes appreciated by +6.0% according to the report.  

Home prices are still increasing but at a slower pace.   

The Week Ahead

The financial markets will be closed on Wednesday this week in honor of President George Bush who passed away over the weekend.  On Friday we get the all-important jobs report which can definitely influence the markets.

Current Outlook: floating

Credit Myth #1: You have only one credit score

After spending over 16 years in the mortgage lending industry I have identified seven myths that consumers commonly hold regarding their credit score.  Over the course of the next few weeks I am going to breakdown each myth and help you better understand how your credit scores are determined so that you can achieve a better outcome for your next loan application.

The first myth is that we all only have one credit score.  In fact, consumers have over 40 different credits scores which are determined by various algorithms that specific industries subscribe to.  Please watch this short video to learn more:

Want to learn more?  I found THIS ARTICLE in Forbes online which goes into greater detail.

Please contact me today to learn more about how your credit will impact your next home loan process.

New Conforming Loan Limits announced for 2019

Christmas has come early to homeowners and prospective home-buyers in the Portland housing market!

Despite median home prices increasing by only +5.1% over the past twelve months the Federal Housing Finance Agency announced that the conforming loan limits in 2019 will increase by 6.9%.

The maximum conforming loan amount for 2019 will be $484,350 for a one-unit property, up from $453,100.

I still wish they would round the loan amount to an even $484,000 but hey, beggars can’t be choosers.

If you’re curious why this change is significant watch this short video where I explain the difference between a conforming and jumbo mortgage.

Here is a full list of the conforming amounts for 2019:

1-unit: $484,350 (up from $453,100)

2-units: $620,200 (up from $580,150)

3-units: $749,650 (up from $701,250)

4-units: $931,600 (up from $871,450)

Home loan rates at two month lows

What do you call a cow with a twitch?….beef jerky……Happy National Craft Beef Jerky Day!  

US Stocks & Interest Rates

Economic uncertainty is taking a toll on the stock market and helping mortgage rates improve.

In an interview with the Wall Street Journal President Trump said it was “highly unlikely” that the US would accept a request from China to hold off on additional trade tariffs as the two countries head into a trade summit.

Furthermore, investors are less certain about the Fed’s future monetary policy as US interest rates head closer to a “neutral” level.  

Economic uncertainty tends to discourage investment in the stock market and encourage capital to flow into safe-havens which helps US mortgage rates.

US interest rates are currently at two-month lows.

Housing Prices

As interest rates decline so do appreciation rates for homes.  Home prices are still increasing year-over-year but not as rapidly as they have over the past few years.  

The Case-Shiller Home Price index for Portland released earlier today shows that homes are 5.1% more expensive than they were 12 months ago.  For a homebuyer who puts 10% down that is still a great cash-on-cash return.  

Josh Lehner of the Oregon Bureau of Economic Analysis recently wrote THIS PIECE which explains how the housing market is re-balancing after years of under supply and strong demand.

The Week Ahead

This week’s economic calendar is busy.  On Wednesday we’ll see new home sales and Fed Chairman Jerome Powell is scheduled to speak.   On Thursday we’ll get minutes from the last Fed meeting and their favorite gauge of inflation (PCE price index).  

Given that mortgage rates are at recent lows I recommend locking in.

Current Outlook: locking

As stocks slide mortgage rates benefit

The irony of Thanksgiving and Black Friday on back-to-back days has always seemed funny to me.  How is it that we spend one day acting grateful for everything we already have then spending the next day trampling over each other to buy new things?

I wish you a warm and blessed Thanksgiving Holiday!

Mortgage Rates

Home loan rates are on a nice run lower thanks to weakness in the stock market.  When stocks do poorly investors typically park their money in perceived safe places which includes the US debt markets.  The additional demand for these securities drives yields lower.

US Stocks

The US stock market was trading at all-time highs only seven weeks ago.  Since then the S&P 500 has fallen approximately 10%.  Since July Facebook, Amazon, Netflix, and Google have lost nearly $1 trillion in combined market capitalization.

Is the loss of stock market wealth contributing to the slowdown in demand for home sales?  Afterall, in order for a person to make a large financial commitment like purchasing a home they have to feel confident about their future prospects.  Lower wealth could cause some people to hold off on buying a home.

Consumer Confidence

According to the Conference Board the Consumer Confidence Index (CCI) is currently at 137.9.  This is the highest level since September of 2000 when it stood at 142.5 so according to this measure households are still feeling pretty good.

However, the CCI has a pretty good track record of being a contrarian indicator as the graph below shows.

Source: Advisor Perspectives

The Week Ahead

It is a holiday shortened week and the economic calendar is relatively light.  I expect US mortgage rates to react to the stock market.  If stocks can rebound and move higher then home loan rates will likely worsen and vice versa.

Current Outlook: floating

Season’s Greetings & A Quick Portand Housing Update

There is so much that I feel gratitude for.  Thank you for all of you who support our business and lives.  With sincere thanks we want you to know that we appreciate you.

The housing market here in Portland is shifting and I wanted to offer a candid and honest assessment of how I see things.  Please take a moment to watch this short video where I explain and provide some data.

Have a warm and safe Turkey Day!  As always we are here to help anyone seeking home loan services without surprises!  Thanks!

Lower oil prices help home loan rates improve

A sincere THANK YOU to those who have served and continue to serve our country!

As an Oregonian I am proud that we are one of five states that honors our veterans by offering a subsidized home loan program which allows those who have served in the military to own a home with more attractive loan terms than a conventional loan.  Learn more about the ODVA loan program HERE.

Mortgage Rates

Although mortgage note rates are mainly unchanged from last week the underlying costs associated with each interest rate improved so overall rate sheets are more attractive for consumers to start this week.

Oil prices

Oil prices reached bear market territory last week meaning they are down 20%-25% off recent highs.  The  US, Russia, and Saudi Arabia have all recently boosted crude production which has increased supply while trade barriers have dampened demand.

Lower oil prices is good for mortgage rates because it is anti-inflationary.

The Fed

As expected the Fed did not hike short-term interest rates last week but hinted that they are likely to hike when they meet in mid-December.  That expectation is baked into the home loan rates available today.  As a reminder the Fed does not directly control mortgage rates but their comments can certainly influence them.

Mortgage delinquencies

Earlier today Corelogic released its monthly loan performance report.  It showed that mortgage delinquencies nationwide decreased to the lowest level in 12 years.  Only 4% of home loans are in some form of delinquency.  This is down from 4.6% a year ago.

Lower delinquencies could encourage lenders to ease credit requirements for loan approval.  This pressure coupled with a lack of enforcement from the Federal Government raises some concerns for me about irresponsible lending moving forward.

The Week Ahead

The economic calendar heats up starting on Wednesday when we’ll see the Consumer Price Index.  I will also be watching out for monthly Retail Sales due out Thursday and Industrial Production on Friday.

Current Outlook: floating