Retiring your Flag

Tattered American flag blowing in the wind



U.S. holidays cover a wide range of meaning and sentiment.  Some are illustrated by holiday-specific decorations, while others use the U.S. flag as a focal point.  Veteran’s Day is one where the flag is displayed in honor of the day.  Many of us hang the stars and stripes in respect for all the men and women who have served in our military.  But do we know what to do with that flag when it is worn and torn? There actually are proper and improper ways to dispose of the American flag when it is time for it to be retired.


One way for the flag to be retired is to burn it, but in a proper ceremony. This is the preferred means for retiring a flag.  The U.S. Flag code states that, “the flag, when it is in such condition that it is no longer a fitting emblem for display, should be destroyed in a dignified way, preferably by burning.”  This does not mean it is acceptable to use your old flag as kindling at your next bonfire.  The flag should be properly folded (in triangular pattern) and burned in a retirement ceremony that is respectful of the flag and what it stands for by laying it atop the fire.


If you would like to honor this tradition but are not comfortable doing it yourself, contact your local post of Veterans of Foreign Wars (VFW), American Legion or other similar organization.  They likely have regularly scheduled ceremonies.


Another option is to bury the flag in a sturdy wooden box, after it has been properly folded.  Some people hold a ceremony similar to that of a short funeral so it is a dignified process.  You may want to mark the burial spot with some type of landmark for future reference.


Shredding the flag is acceptable but only by separating the thirteen stripes with sharp scissors, leaving the blue field of stars intact.  Then the pieces must be burned or buried via one of the above-mentioned methods.


Lastly, you can send it to a reputable flag recycler for them handle for you.  Flags made today are not always cotton and natural material as they were back when flag codes were written.  The nylon and polyester that is often used today is more difficult to burn and can generate a toxic odor.  If open and safe space is limited and no VFW or American Legion post is nearby, this may be the best option for you.


Whichever method you choose, keep in mind what the flag represents and those who made sacrifices defending it.  This is why the American flag deserves a dignified and respectful retirement.

November 22, 2017 by · Leave a Comment

What Is the Difference Between FHA and Conventional Loans?

Couple looking at photos on tablet computer laughing



When shopping for a mortgage, one question is almost unavoidable: Should I apply for a Federal Housing Administration (FHA) or a conventional loan? The correct answer depends on a couple of things and varies by borrower. Let’s see if we can help you decide which is best for you.


FHA loans usually make sense for people with less of a down payment and lower credit scores. There are more fees involved, but greater flexibility in the underwriting guidelines and rates are typically lower than with conventional loans. Conventional loans are the popular choice for people with stronger credit scores and a larger down payment.  The guidelines are tighter, but the monthly payments could be significantly lower because of several mitigating factors.


Here is why.


FHA loans, which were created in 1934 to increase home ownership during the Great Depression, offer more flexibility because they are insured by the government agency. FHA doesn’t lend the money, but it does guarantee the loan if you default. The loan is actually made by a private lending institution with FHA setting the underwriting parameters. A down payment of only 3.5% of the sales price is needed for these loans and the money can come as a “gift” from an outside source such as parents, close friends, employer or a charitable organization.


Conventional loans are made by private lenders then are bought by government-sponsored companies Fannie Mae and Freddie Mac.  You need at least a 680-credit score and a 5% down payment in most of the time to make it worth considering. In most circumstances, lenders require you to have 5% of your funds before a gift can be used.


FHA loans are a bit pricier because of the required mortgage insurance.  They require an upfront Mortgage Insurance Premium (MIP) calculated at 1.75% of the loan amount that is added to the loan, then a monthly premium based on 0.85% of the loan amount.  One can argue that’s the cost of having a limited down payment and less-than-stellar credit. But if you are financing with a minimum down payment, you are required to keep this MIP payment for the life of the loan unless you refinance down the road.


One of the most attractive features of a conventional loan is Private Mortgage Insurance (PMI) rates that are scaled to the size of your down payment.  You can eliminate PMI altogether if you can make a down payment of 20% or more of the sale price. There are also preset benchmarks that allow PMI to be canceled on conventional loans. If you are purchasing a home that you expect to live in for many years, this point should be heavily considered when determining which type of loan to apply for.


A major part of the underwriting process is a borrower’s debt-to-income ratios (the percentage of monthly income that is spent on housing, student loans, auto loans, credit card payments, other credit debt and child support).  Lenders have some flexibility on these ratios when there are strong compensating factors such as plenty of reserves left in the bank after the transaction or very high credit scores.  Generally speaking though, FHA’s guidelines are more forgiving on this than conventional rules.  Therefore, if your total payments will require a huge part of your income, an FHA loan may be your best option.


Getting the borrower(s) approved is only half the formula for a successful transaction. The house you are purchasing must also be approved.  This is done via an appraisal report that the lender will order on your behalf.  While both FHA and conventional guidelines have strict standards for the property, FHA’s appraisal process is considered tougher than conventional.  By theory, this is an advantage to you as the buyer.  However, if you are intending to purchase a home “as is” that needs some TLC, you may find it more difficult to get the financing done via FHA.


Keep in mind both FHA and conventional loans have a maximum loan size that varies per county.  Conventional loan maximums can be higher than FHA, but it’s important to research limits for your area or speak to your mortgage consultant for details.


If you have had financial issues recently, FHA may be your only choice as the wait times for a new loan are more forgiving. In general, 3 years must pass following a foreclosure or short sale while the wait after a Chapter 7 bankruptcy is 2 years. Conventional loans require 4 years waiting period for both situations in most circumstances.


In short, it’s important to understand the characteristics of both FHA and conventional loans.  If you have credit scores below 680 and lack a good-sized down payment, FHA is likely the best way to go.  On the other hand, there are advantages to going conventional if you can do so.  Discussing your options with your mortgage professional before starting the house hunt will help you make the best decision and allow the process run more smoothly.

November 16, 2017 by · Leave a Comment

Market Commentary week of November 13th, 2017

Finance Digital Data Concept

This week brings us the release of five pieces of economic data for the mortgage market to watch. While that is not an overly large number, several of the reports that are being posted this week are considered very important to the markets. That raises the possibility of seeing noticeable movement in the bond market and mortgage rates.

The first data is October’s Producer Price Index (PPI) at 8:30 AM ET Tuesday, which is one of the two key inflation readings on tap this week. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. Signs of rapidly rising inflation make long-term securities such as mortgage-related bonds less attractive to investors and leads to higher mortgage rates. The overall reading is expected to show a 0.1% rise from September’s level while the core data is expected to rise 0.2%. Weaker than expected readings would be good news for bonds and mortgage rates, while a larger than forecasted increase in the core reading could lead to higher mortgage rates Tuesday morning.

Wednesday has two monthly reports at 8:30 AM ET that may have an impact on mortgage rates. Both of them are considered to be important. The first will come from the Commerce Department, who will give us October’s Retail Sales. This data measures consumer level or retail spending. It is considered extremely important to the markets because consumer spending makes up over two-thirds of the U.S. economy. It is expected to show a 0.1% increase in retail-level spending, meaning consumers spent a bit more last month than they did in September. A larger increase in spending would be considered negative news for bonds because rising spending fuels economic growth and raises inflation concerns in the bond market. If Wednesday’s report reveals a decline that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower. If it shows a larger rise, mortgage rates will likely move higher.

Next up is October’s Consumer Price Index (CPI) from the Labor Department, also at 8:30 AM ET. The CPI is the sister report to Tuesday’s PPI, except it measures inflationary pressures at the consumer level of the economy and is one of the most important reports the bond market sees each month. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the consumer level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.1% increase in the overall reading and a 0.2% increase in the core data.

October’s Industrial Production data is Thursday’s only monthly release. The at 9:15 AM ET report will give us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.5% increase in production, indicating strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this report is not expected to greatly influence the markets. Therefore, it will likely take a sizable variance from forecasts for it to have a noticeable impact on Thursday’s mortgage pricing.

The week’s calendar closes with October’s Housing Starts early Friday morning. This report gives us an indication of housing sector strength, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show an increase in starts of new homes, meaning the new home portion of the housing sector strengthened last month.

Overall, it is likely going to be another active week for mortgage rates. The most movement is probably going to come the middle days, but we can see volatility any day. Therefore, please proceed cautiously if you are closing in the near future and still floating an interest rate.

November 13, 2017 by · Leave a Comment

Veterans Day Through the Years

military dog tag thank you on wood

Veterans Day is a holiday that is widely known as a day to recognize our veterans and their service to our country.  While that is accurate, it actually has much more meaning and history than many of us may realize.   The holiday originated as Armistice Day to mark the end of fighting between the Allied nations and Germany during World War I.  The cease-fire happened at 11:00 AM on November 11th of 1918.   This is why November 11th is always the holiday, regardless of which day of the week it falls on.


President Woodrow Wilson proclaimed the day as Armistice Day in 1919 with the intention to honor the Veterans of World War I with parades and other activities, but it did not become a legal federal holiday until 1938.


Congress passed a resolution in June 1926 that said the U.S. President should commemorate the day each year with a proclamation calling for the U.S. flag to be displayed on all government buildings and for the people of the U.S. to recognize the day with appropriate activities to honor those veterans.  This is a practice that is still followed today.


It was in 1954 that the name of the day was changed to Veterans Day to also recognize those who fought in World War II and the Korean War. That is also when Congress formally expanded it to a day to recognize all Veterans of all U.S. wars, not just the people who gave their lives during military service.


As with all federal holidays, if the designated day falls on a Saturday, it is recognized nationally on Friday.  When the day falls on a Sunday, it will be recognized the following Monday.  This year November 11th is a Saturday, so look for recognition at schools some organizations on Friday the 10th.  Parades and other activities could take place Friday or Saturday this year.


We hope that giving some insight to this holiday will help appreciate what the day really means to our country.  This holiday reminds us to thank all of those who have served in the past, and currently serve in all branches of our military.

November 9, 2017 by · Leave a Comment

Market Commentary week of November 6th, 2017

Finance Digital Data Concept

This week brings us the release of little that is expected to affect mortgage rates. There is only one monthly report set to be posted in addition to a couple of Treasury auctions that can be influential. It is likely to be a much calmer week for the mortgage market compared to recent weeks.

There is nothing of importance scheduled for tomorrow or Tuesday, so we can expect bonds and mortgage rates to be driven by stock movement as the weeks starts. Last Friday’s Employment report-fueled bond gains could extend into tomorrow’s trading, possibly helping rates to begin the week on a positive note.

The first events of the week will be the two important Treasury auctions Wednesday and Thursday. 10-year Treasury Notes will be sold Wednesday while 30-year Bonds go Thursday, giving us an indication of demand for long-term securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading Wednesday and/or Thursday. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates. Wednesday’s 10-year Note auction usually has the bigger impact on rates than 30-year Bonds.

We will get the sole piece of relevant monthly economic data late Friday morning when November’s preliminary reading of the University of Michigan’s Index of Consumer Sentiment is posted. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 100.4, down a little from October’s final reading of 100.7. That would be considered positive news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. And with consumer spending so important, any related data is watched closely. The lower the reading, the better the news it is for mortgage shoppers.

Overall, I am not expecting to see an overly active week for mortgage rates, although we should see movement more than one day. Wednesday is the best candidate for most important day due to the afternoon Treasury auction. We could see the markets get active at any time if stocks make a move upward or downward, so it is recommended that you still maintain contact with your mortgage professional if still floating an interest rate and closing soon.

November 6, 2017 by · Leave a Comment

Who is Eligible for a VA Loan?

Front side of typical american porch colonial house with white t


If you are an active or former member of the military, it may be worthwhile to consider a Veterans Administration (VA) loan for your next home purchase or refinance. Many veterans don’t realize they have this benefit available to them.


If you meet any of the following criteria you likely are eligible for a VA mortgage:


  • Honorably discharged after serving at least 90 consecutive days of active service during wartime or 181 consecutive days of active service during peacetime (there is a two-year requirement if the veteran enlisted and began service after Sept. 7, 1980 or was an officer and began service after Oct. 16, 1981).
  • Served six years in the National Guard or Reserves
  • Are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.


It’s important to note that The VA doesn’t actually make these loans.  Their role in the transaction is guaranteeing a good part of the loan balance if you default on it.  Private lenders actually underwrite and make the loans, meaning your monthly payment will go to the lender rather than the VA.  The current maximum loan amount is set at $424,100 for most counties.  As with other types of mortgages, areas designated as High-Cost allow for higher amounts.


Did you know that VA Loan benefits are reusable? As long as the loan is paid off, you can continually use the entitlement. Even if you’ve lost a home to foreclosure or declared bankruptcy previously, you should still be able to get another VA loan.




Some of the reasons why you should consider a VA loan if you are eligible include:

In most cases, there is no down payment required. For cash-challenged young people, this factor can’t be underestimated. Especially when conventional and FHA loans typically require down payments of at least 3% of the sales price.


VA loans also do not require monthly mortgage insurance premiums. This is another significant advantage because FHA loans have up-front and annual mortgage insurance charges. And unless you are putting down 20% or more, borrowers must purchase private mortgage insurance on conventional loans. There is an administrative cost of sorts with the VA Funding Fee, which usually is 2.15% of the loan amount if this is your first VA loan (rates are higher for subsequent loans), but can be rolled into the loan instead of paid out of pocket. Reservists and members of the National Guard will pay a slightly higher rate in most circumstances.  The Funding Fee rate can be lowered by making a down payment of at least 5% and is waived altogether for borrowers with service-related disabilities.


Another great feature is the fact that VA mortgages are typically assumable, meaning someone can take over your favorable mortgage payment if you sell the home.  That could potentially be a huge advantage in a market where interest rates have risen since your purchased the home.


Lastly, underwriting guidelines for VA loans are typically less stringent than other types of mortgages.


It is important to know that VA loans are meant for primary residences only, such as single-family homes, condos, and some multi-unit properties. Unfortunately, you can’t get a VA loan for an investment property or that dream vacation home.


While it is easier for a veteran to receive a home loan, it’s still not a certainty. There are many aspects to the home purchase and mortgage underwriting process that must be reviewed.  However, if you have VA benefits available and can be approved, it would be smart to consider utilizing this valuable benefit for your home financing needs.

November 2, 2017 by · Leave a Comment

Market Commentary week of October 30th, 2017

Finance Digital Data Concept


This week is packed with relevant economic releases and other events that have the potential to affect mortgage rates. There are eight relevant economic reports for the bond and mortgage markets to digest in addition to another FOMC meeting. We have data or other events every day, so we should see plenty of movement in rates this week. The data scheduled ranges from minor to extremely important, meaning some reports will have a much bigger impact on rates than others.

The first release of the week will come from the Commerce Department who will post September’s Personal Income and Outlays report at 8:30 AM ET tomorrow morning. This data gives us an indication of consumer ability to spend and current spending habits. It is important to the markets because consumer spending makes up such a large part of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns that make long-term securities such as mortgage-related bonds less attractive to investors. Analysts are expecting to see a 0.3% increase in income and a 0.8% rise in spending. The jump in spending is more likely a result of storm-related purchases, so it its impact on the markets should be restricted. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.

The 3rd Quarter Employment Cost Index (ECI) will be released at 8:30 AM ET Tuesday. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.6%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week.

October’s Consumer Confidence Index (CCI) is next, coming late Tuesday morning. This Conference Board index gives us a measurement of consumer willingness to spend. It is expected to show a rise in confidence from last month’s 119.8 reading. That would mean that surveyed consumers better about their own financial and employment situations than they did last month, indicating they are more likely to make large purchases in the near future. That would be unfavorable news for the bond market because consumer spending makes up over two-thirds of our economy. Current forecasts are showing a reading of 121.5. The lower the reading, the better the news it is for mortgage rates.

Wednesday starts with two morning economic reports, one of which is very important. The first is the ADP Employment report before the markets open. It has the potential to cause some movement in the markets if it shows much stronger or weaker numbers than expected. This report tracks changes in private-sector jobs, mostly of ADP’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that follows a couple days later. Still, because we have seen reaction to the report, we should be watching it. Analysts are expecting it to show that 217,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.

The second and more important report of the day will be the Institute for Supply Management’s (ISM) manufacturing index for October at 10:00 AM ET. This index measures manufacturer sentiment, which is important because it gives us an indication of manufacturing sector strength. It is considered to be one of the more important reports we see each month, partly because it is the first every month that tracks the preceding month’s activity. Wednesday’s release is expected to show a reading of 59.3, indicating that manufacturer sentiment slipped from September’s level 60.8. This means fewer surveyed manufacturing executives felt business improved during the month than in September, hinting at weaker manufacturing sector activity. A smaller than expected reading would be good news for bonds and likely lead to lower mortgage rates.

This week’s FOMC meeting begins Tuesday and adjourns Wednesday afternoon. It is widely expected that the Fed will not make a change to key short-term interest rates. Chairperson Janet Yellen and friends have indicated they expect to make a rate hike before the end of the year, but it would come as a major surprise if it came at this meeting. That means that market participants are expecting it to come during December’s meeting. Wednesday’s meeting will adjourn at 2:00 PM ET and does not include economic projections or a press conference. These meetings normally have a strong likelihood of causing volatility in the markets. However, I believe this one will have less of an impact than usual unless there is a surprise in talk of the Fed’s balance sheet reduction plan.

The 3rd Quarter Productivity reading will be released Thursday at 8:30 AM ET. It is expected to show a 2.8% improvement in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern. This is a relatively low importance report, so it will take a significant variance from forecasts for it to directly affect mortgage rates.

Friday brings us the release of October’s Employment report at 8:30 AM ET. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for a 0.1% increase in the unemployment rate, rising from 4.2% to 4.3%. It is also expected to show an increase in payrolls of 300,000, rebounding from September’s surprising loss of 33,000 jobs. The third headline number is average earnings that is expected to reveal a 0.1% rise. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates noticeably, especially if the stock markets react poorly to the news.

The week’s calendar will close late Friday morning when September’s Factory Orders data is released. This report is similar to last week’s Durable Goods Orders release except it includes orders for both durable and non-durable goods. It is expected to show a 1.2% increase in new orders from August’s level. A large decline would be good news for the bond market and mortgage rates while an unexpected rise would be bad news. However, it is worth noting though, that this report is not considered to be highly important to mortgage rates and it follows a major release. Therefore, it probably will not play a role in Friday’s mortgage pricing.

Overall, the single most important day is Friday due to the Employment report but Wednesday is expected to be pretty active also. We have plenty of relevant data set for release this week along with the FOMC meeting. This makes it quite likely that we will see another active week for mortgage rates. Accordingly, please maintain contact with your mortgage professional if still floating a rate and closing in the near future.

October 30, 2017 by · Leave a Comment

Keeping your Goblins Safe at Halloween

Halloween celebration


It’s the time of the year for little princesses, Superheroes, and our favorite Star Wars characters to be roaming our neighborhoods in a hunt for as many sweets as can possibly be carried by one person.  While Halloween is an exciting and fun night for our little goblins, it also brings hazards that should not be overlooked.  We have put together some tips to help ensure your Halloween is filled with treats and not problems.

Costumes:  Keeping our kids safe on Halloween should start with their costumes.  It is important to keep in mind that not only are they going to look adorable or fierce, they are also going to be quite active.  It is no easy feat to hit their goal of 200 houses per hour to make sure the pillowcase comes home stuffed.  This is where costume length and accessories become relevant.  Unfortunately, it takes just one fall to ruin an entire evening of fun. Keep the costume length well off the ground and if Cinderella’s dress must go below the knees, be sure to allow enough room for their legs to stretch.  Avoiding restrictive masks can also be helpful. Accessories such as swords, knives, and wands should always be short and soft or flexible.  And let’s not forget comfortable shoes!  While high heels or cowboy boots may be cute, they are not functional for the evening’s task at hand.

It also is imperative that Wonder Woman and Spiderman can be seen by drivers as they are on their quest to rid your neighborhood of all Reese’s Pieces.  Flashlights with a wrist band, reflective tape and glow sticks are good ways to make your child visible.  Stress the importance of staying on the sidewalk and crossing the street only when necessary. Crosswalks tend to be illuminated brighter than other parts of a road and usually include stop signs or other signage to draw a driver’s attention.

Route:  Plan an attack route with an estimated timeline before heading out. Including your children in this step helps make the evening more of a family affair.  Them having a say in the planning may prevent arguments between siblings (or with you) on which direction to go.  If your little creatures are so old that being seen with you in public will cause a cosmic explosion of some type, establish a communication chain with friends in the neighborhood.  A quick text when your children have appeared on each other’s doorstep effectively creates a checkpoint without your child’s knowledge or the rolling of the eyes that would certainly follow if they learned of your sly antics.  This will also allow you to track their progress within the planned route.

The Loot:  Be sure to inspect all of their well-earned treats before allowing a tasty reward.  Besides food allergies and prevention of hyperglycemia from an unsupervised candy binge, it is important to check for any signs of tampering.  Things to look for are torn wrappers, pieces that have opened at one end and pin holes.  It is also recommended that homemade treats be avoided at all times unless they came directly from someone you know well. A good rule of thumb: If there is any doubt, toss it out.

There is no doubt that Halloween can be a great time for the kids and parents.  Who doesn’t have some type of fond memory from their past Trick or Treating?  And some of us may also have an unpleasant memory or two that we wish we could forget but are often reminded of at family gatherings.  Following these tips will help keep the evening a fun and enjoyable event.  And a tasty one at that!

When the candles have burned out and the candy comas have subsided, consider donating your leftover candy (we hear there really is such a thing, but we’re not convinced!) to Soldiers’ Angels Treats for Troops Program.  They’ll ship your donated candy to deployed service members anywhere around the world or distribute to veterans in VA Hospitals across the country.  You can visit to find a drop off location near you, or you can email for a location to ship your candy.

Be safe and Happy Halloween from all your friends at Paramount!

October 26, 2017 by · Leave a Comment

Market Commentary week of October 23rd, 2017

Finance Digital Data Concept



This week brings us the release of four economic reports that may influence mortgage rates in addition to two Treasury auctions that have the potential to do so also. The most important data comes later in the week and there is nothing of relevance set for tomorrow. Despite the lack of economic data, we still could see movement in the bond and mortgage markets tomorrow as the week begins.

Durable Goods Orders report for September will start this week’s events at 8:30 AM ET Wednesday. It gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for an increase of 1.3% in new orders for products such as airplanes, appliances and electronics. If we see a large increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significant decline should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance in order either way, likely will have little effect on Wednesday’s bond trading or mortgage pricing.

September’s New Home Sales is Wednesday’s second release, also coming from the Commerce Department. This report covers the small percentage of home sales that last week’s Existing Home Sales report didn’t include. It is expected to show a small decline in sales of newly constructed homes, but I don’t see this report having much of an impact on mortgage rates regardless what it shows. I believe the markets will be much more focused on the Durable Goods Orders data.

This week also has Treasury auctions scheduled the first four days. The only two that have the potential to influence mortgage rates are Wednesday’s 5-year and Thursday’s 7-year Note sales. If those sales are met with a strong demand from investors, particularly the first, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to slight upward revisions to mortgage rates.

Friday has the remaining two reports. The first is the preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Friday’s release is the first and usually has the biggest influence on the markets. Current forecasts call for an increase of approximately 2.4% in the GDP, which would mean that the economy grew at a slower pace than the 2nd quarter’s 3.1% rate. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Friday morning.

The week’s last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers’ willingness to spend. Current forecasts show this index rising moving little from its preliminary reading of 101.1. Good news for mortgage rates would be a sizable decline in the index, meaning consumers are likely to not spend as much as last month.

Overall, look for Friday to be the most active day for mortgage rates, although stock earnings news could still affect the broader markets and possibly mortgage rates any day. I suspect this will be a fairly active week for mortgage rates but the likelihood of seeing a significant move in rates seems to be somewhat limited to Friday unless something unexpected happens.


October 23, 2017 by · Leave a Comment

How are Credit Scores Determined?

Beautiful woman with her boyfriend on the beach


How are Credit Scores Determined?

And how to build or rebuild your credit profile


Our credit scores are most commonly attributed to mortgage financing, which they do indeed contribute heavily to.  The truth is though, they have an impact on many other facets of our lives and deserve your attention even if a home purchase or refinance isn’t in your plans.  Besides credit card and auto loan financing terms, your credit score also helps determine premiums for auto and some types of other insurance products.  They also are common in the process of applying for a new job.  Therefore, it is important to ask yourself, do I know exactly what my credit report shows and is there is anything I can do to improve my scores?


The first question is easy to address.  Under Federal law, we are entitled to a free copy of our credit reports annually from all three major reporting bureaus.  Whether you are trying to build a credit profile for the first time, rebuild following some difficulties in the past or simply trying to boost your average credit score to a higher tier, your initial move should be to obtain copies of the existing reports. That can be done by going to or calling 1-877-322-8228 to request them.  This site is maintained by Equifax, Experian and TransUnion and is the designated place to go for your free annual reports.


The latter question is more complicated, but in most circumstances, some effort and discipline on our part can raise our scores.  There are plenty of companies that offer to rebuild credit for a fee.  In most circumstances, they are a waste of money because there is little they can do that you can’t do yourself. It is also an industry that has a reputation for ineffective results.


Let’s start with some of the basics that affect our scores.  The most weight given to your score comes from your payment history with the creditors reporting to each bureau.  Your pay history is rated as Paid as Agreed and late payments in 30-day increments (30-60-90 days past due). While paying a credit card or loan 15 days late will likely cause you to incur late fees with the lender, it will still show in your credit history as paid on time because you did not reach 30-days past due.  This is important to remember in terms of maintaining your credit score.  Making a late payment is not harmful to your credit score, as long as it posts before the 30-day threshold isn’t reached.


The second biggest influence is your credit utilization ratio, or the percentage of your available credit that you currently owe.  The scoring models want to see credit used, but not abused.  Owing a high percentage of your total credit limit will negatively affect your score.  The general rule of thumb is to keep your utilization ratio below 30%.  The higher this percentage goes, the bigger impact it will have on your scores.  Keep this in mind when using cards with lower credit limits. Maintaining a low credit utilization ratio will help boost your score, regardless if you are new to credit, rebuilding or have a good score already.


One way to establish or reestablish credit is to open a secured credit card.  This is where the creditor holds your money in an account as security.  To open the secured account, you give the credit card company permission to use the funds in that account to offset the card balance if you fail to pay as agreed.  The downside is that you lose access to some of your money and many of these accounts come with fees. The upside is that they report your pay history to the major credit bureaus.  Therefore, as long as you properly maintain the account, you will have a positive tradeline in your credit file.


If you are looking to open a new credit card to build your profile, be attentive to the type of card you are applying for.  Most of the cards that offer low interest rates and rebates or rewards are tailored towards more experienced borrowers with a strong credit history.  Applying for cards that will not be approved will leave inquiries in your credit file that will hurt your scores.  There are creditors that specialize in borrowers with no or little credit and others that target people with lower established scores. Research the appropriate product before applying.


Another option is to have someone you trust add you to their account as an Authorized User.  Once this is done, the specifics and history of that account will also report in your credit file.  Not all companies report Authorized User accounts, so be sure that your trusted friend or relative’s creditor does. Keep the above stated tips in mind regarding pay history and utilization rate.  Ideally you would like to be authorized on an older account with an excellent pay history, low balance and high credit limit. And if their trust in you is not as strong as yours in them, once you get the card in your name, turn it over to them so you cannot make purchases without their knowledge.  The account info will still report in your credit file even if you don’t use the account.


Following the above tips will take some time to be successful but should significantly boost your credit scores.  The end-result will be better financial terms for your credit accounts and most insurance products.  It could also help you get that new job you are hoping for.  So be attentive to your scores, now and in the future.

October 19, 2017 by · Leave a Comment