Weekly Rate & Market Update 4-29-16
Question of the week: If you run a credit report will it mess up my score?
Answer: This is a very common question for us to hear from clients during conversations for preapproving and determining options for refinances. Because there is so much misinformation regarding credit scores some people are over cautious for any credit report being pulled. As a result they are resistant to our obtaining all the necessary information we need to provide accurate and complete information.
My standard response is that I don’t have to pull a credit report if you do not want me to but I cannot provide a pre-approval letter for your offer until I do.
This can often lead to, “well I just got a free credit report on line, can you use that?”
No.
When we pull a credit report it is through a company that is approved with Fannie Mae, Freddie Mac and HUD. As a result the reports are accepted as accurate for showing the applicant’s credit history and outstanding obligations. The report we receive is a “tri-merge” report, meaning it combines reports from TransUnion, Equifax and Experian and provides the credit scores from all three bureaus.
When preapproving a loan, either for a purchase or refinance, we upload this credit report along with the other information from the application package to the Automated Underwriting System (AUS) for either Fannie Mae (Desktop Underwriter) or Freddie Mac (Loan Prospector). The report that is part of our file is then read by the AUS and used for determining if the loan can be approved as long as all the evidence for income, assets and property match the information we uploaded.
Without having our credit report in our system to upload into the AUS for Fannie or Freddie a loan cannot be preapproved, therefore I need to pull my own credit report for your file.
Regarding the impact on your credit scores, our inquiry has zero to minimal impact depending on your history. The models used to determine credit scores have built in a tolerance for multiple inquiries for different lenders in the mortgage and auto loan industries. This is because it is not unusual for someone looking to buy a car or home to speak with more than one lender and each will want to obtain their own credit report. As a result if you have spoken to two other lenders within the past week or two and then call me and rightly decide you want me to work with you on your new mortgage application, when I pull my credit report your credit score should be the same as the score with the first lender you spoke with a week or so before.
Inquiries that will have a negative impact on your credit scores are for consumer, or revolving debt for credit cards and department store cards. If you have multiple inquiries from different credit card companies and/or department stores it appears you are seeking credit from anywhere. This type of behavior is seen as a negative and will impact your score.
When you call or come in to get prequalified or preapproved to purchase your new home or to refinance your existing mortgage be prepared to have me ask you for social security numbers and dates of birth, I will need a credit report and this is the information I will need.
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
Last week while I was away was a fairly light week for economic data. This week, however, had a fair amount of big news. The overall news shows a dormant economy with consumers leading the dormancy as indicated by consumer oriented data. Consumer confidence slipped in April from March with lower expectations for the future component dragging the report down. This is good news for lower rates.
The first assessment of first quarter Gross Domestic Product shows a slowdown from the last quarter of 2015 with economic growth at only 0.5%. What growth there was occurred due to consumer spending, however that spending dropped from the end of 2015, with the decline due to reduced purchase of durable goods. Prices also slowed from 4th quarter 2015. The GDP report is also good news for lower rates.
Tripling down on consumer driven data was the personal income and outlays report for March. On the income side the news was positive with wages increasing 0.4% for the month following increases in January and February. The other shoe in the report though is the slowdown in consumer spending, up only 0.1% from February. With consumers earning more but not spending as much indicates they are saving their increased earnings, or using it to pay down debt, but not buying goods and services. This is positive for lower rates as well.
With the data presented this week indicating a reluctant consumer it is not surprising that the minutes released on the recent Federal Reserve meeting in which no increase in the Fed Funds interest rate was made. In the minutes the Fed states that our economy “appears to have slowed.” With consumer spending making up 65-70% of our economy slower increases in personal consumption of goods and services results in slower economic growth. The data points to a reduced chance of a Fed increase at its next meeting in June.
Rates for Friday April 29, 2016: While I did not put out the Weekly Rate & Market update last Friday I did record rates for the chart and they were up 0.125% from the prior week—mostly due to profit taking. This week’s news has softened rates, with high-balance rate dropping to prior week’s rate but conforming hanging onto to last week’s pop up though weakening. Looking forward rates will continue to move in tight range based mostly on technical trading. While we may see some drift down any such move will not be significant nor worth the risk of trying to catch such a drift. Lock while you can at these low rates.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.625% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits
The Weekly Rate & Market Update was on hiatus last week as I was in Tulsa for services for a family member I considered to be an uncle, Glenn Wright. The best story teller I will ever know, going places in Tulsa was like travelling with Santa Claus—he knew everyone and their story. When you met Glenn he was truly interested in you, where you are from, your family, what your family is doing. You can know someone for many years, then introduce them to Glenn and learn more about this person in ten minutes of him getting to know this person than you had known.
The saying goes that the value of our lives is measured by the friends we have in our lives—Glenn was a very high value man and will be missed.
This week meet someone new, or meet someone you already know in more depth, this will enrich your life and their’s.
Have a great week,
Dennis
