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Mortgage news you can use – November 2012

I copy/pasted this from part of a weekly email that I receive from Jeff Buchweitz at Fairfield Mortgage. It’s pretty dry stuff, but in a world that needs clarity, his email reaches me every week with an excellent, quick report on rates, consumer tips and the complex things about the mortgage market that cause things to swing and sway from time to time. I’ll try to remember to post this content more often!

Negative European News Leads to Lower Rates

Nearly all of the news out of Europe over the last week has been negative.  European Union (EU) forecasts for economic growth for the next two years were downgraded more than expected, and EU officials warned of greater downside risks.  In addition, German economic growth data fell short of consensus forecasts.  Greek leaders passed a series of austerity measures required to receive additional aid, but widespread riots and protests took place during the vote.  Concerns about Europe have caused investors to shift funds to safer assets, including US mortgage-backed securities (MBS), and this has been favorable for mortgage rates.

Ask the Underwriter


Q: A buyer plans to purchase a home with cash and then take out a loan after closing.  Is there any problem with this plan?

A:  Yes, there is a big problem with this plan.  To be eligible for a “cash-out” refinance, a buyer must have been on the title of the property for at least six months from the day the note was signed.  This is a universal mortgage guideline and the six months must pass before the buyer can obtain financing.

Q: When is a drive-by appraisal allowed on a Conventional loan?
A:  Never.  Exterior-only appraisals are no longer permitted on Fannie Mae / Freddie Mac Conventional loans.

Know Your Credit Utilization Ratio

Before closing out a credit card, you should know your “Credit Utilization Ratio.”  This is simply a measurement of all of your credit cards balances divided by the credit card limits.  To maximize your credit score, this ratio should be 30% or less.  When closing out a credit card, the scoring model looks closely at this ratio.  If your Credit Utilization Ratio is less than 30%, then closing the credit card will not impact your credit score very much at all.  However, if the Credit Utilization Ratio is over 30%, your score will be adversely affected by closing out a credit card.  One reason why is that your credit card capacity is lower than before, and the model does not like this.  So, be sure to know your credit card balances, limits, and Credit Utilization Ratio.  Then, keep this ratio under 30% if you can and only close out a credit card when it is.

Looking Ahead


The most significant economic data this week will be the monthly inflation reports.  The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Wednesday.  The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday.  CPI looks at the price change for those finished goods which are sold to consumers.  In addition, Retail Sales will be released on Wednesday, along with the detailed FOMC Minutes from the October 24 Fed meeting. Retail Sales account for about 70% of economic activity.  Industrial Production will come out on Friday as well.  Investors also will be waiting for news about whether Greece will receive its next scheduled round of European aid.

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