Monthly Archives: December 2009

‘Tis the season to do shopping — and get bombarded with offers to open credit cards.

The deals are tempting, too. “Open a charge card today” and save up to 20% on your purchase. Considering that the average Black Friday ticket was $343, that’s $68 saved per store.

For big-ticket items like televisions, the savings are even bigger.

But for people in the market for a new home — or looking to refinance — taking advantage of in-store savings could be a long-term money loser.

Every time you apply for a credit card, your credit score drops.

According to myFICO.com, “new credit” accounts for 85 out of 850 possible credit scoring points. New credit is defined by such traits as:

• Number of recently opened accounts
• Number of recent credit inquiries
• Time since credit inquiry(s)
• Proportion of accounts that are recently opened to all open accounts

Shoppers with few open credit cards are more likely to see their scores drop that shoppers with many cards.

Regardless, a credit score is worth protecting because of how mortgage rates are made. A conventional mortgage applicant with 20% equity whose FICO is 720-739 will be subject to a 0.125% loan fee that a comparable applicant at 740 would not have to pay.

• For 700-719, the cost increases to 0.750%
• For 680-699, the cost increases to 1.500%
• For 660-679, the cost increases to 2.500%

Having a low credit score can be expensive.

It is okay to take advantage of in-store savings during the holiday shopping season, but it’s also important to be aware of how your credit score may be affected.

If you’re not applying for a mortgage in the next six months, you’ll likely be alright. But, on the other hand, if you know you’ll need your FICO soon, consider whether saving 15 percent on a $343 ticket is worth the long-term cost of a higher mortgage rate.

When a home seller accepts a contract on an MLS-listed property, the property’s status changes from “Active” to “Pending”.

This means the home is scheduled to sell, but not yet sold.

Each month, the National Association of Realtors® tallies the number of pending homes and publishes the data as the Pending Homes Sales Index report.

In October, for the 9th straight month, the index gained. It’s the longest such streak in Pending Home Sales history.

Because a “pending” home sale is just a contract between buyer and seller, it’s not as important to the economy as actual home sales. However, the Pending Home Sales Index can be a fine predictor of future activity.

Historically, 80 percent of homes under contract “close” within 60 days, and most others close within 120 days. Recent Existing Home Sales data corroborates this. Home sales activity is at its highest pace in nearly 3 years.

The Pending Home Sales Index does have some shortcomings, though:

1. It doesn’t account for newly constructed homes, a small but important part of the real estate market
2. It doesn’t track For Sale By Owner properties and other non-MLS listed homes
3. Its sample set is small, measuring just 20 percent of all MLS-listed sales

Despite this, however, Pending Home Sales is a terrific measure of real estate market strength. Homes are going under contract at a dizzying pace. It’s thinning out home inventory supplies and pressuring prices to rise.

This chain reaction is what makes Pending Home Sales Index worth tracking. As the number of homes under contract increase, home prices can’t be far behind.