The Fed looks at three things when deciding to cut rates:
- Inflation. CPI came in cooler than expected today, despite tariffs, so that bodes well for rate cuts. Note: many people on X insist tariffs are deflationary because they destroy/reduce demand.
- Labor Market. Powell believes the labor market is holding strong but many analysts believe it is getting much weaker, as per this post by Danielle DiMartino Booth
- How Much They Dislike The President. 😊 This factor does not bode well for rate cuts.
But, as Meatloaf famously reminded us, in what might be the best song ever written, Two Out Of Three Ain’t Bad. And the betting markets seem to agree, as the odds of multiple rate cuts this year greatly increased this morning.
Please Don’t Pay Off Credit Cards
Borrowers often need to pay down or pay off credit card balances to qualify for mortgage financing (to get debt ratios in line).
Problems arise, though, when responsible borrowers pay off credit cards too soon – thinking they’re helping the cause.
If borrowers pay off credit cards two or more months prior to close, it is no issue, as credit card companies will have time to update the balances, and credit reports will reflect them.
We recently had a borrower pay off her credit cards a few weeks before close of escrow, however, and it turned into a nightmare.
We now have to collect bank statements that show that the payoffs were made by the borrower and where the payoffs came from – and we have to get updated credit card account statements.
If the borrower had instead just sent us her credit card statements, we could have just included the payoff amounts on her closing statement and paid them off through escrow without any additional paperwork.
(And yes, we had explained this; the email was just missed, is all.)
So – this is just a reminder that borrowers should pay off credit card balances through escrow when they have to do so to qualify.
This is very similar to our reminder to borrowers getting “gift funds” from relatives. It’s much easier from a documentation perspective to have the gift funds deposited into escrow instead of into a borrower’s bank account.
Note: If borrowers are paying down balances to improve their credit scores (instead of to lower their debt ratios), then they should pay down balances prior to close (but that is a discussion for another blog).
