Illinois Mortgage Rates Weekly Update
11th July 2009
Welcome to Illinois Mortgage Rates and News week in review for the week ending July 9th, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.
Strike up the band, happy days are here again. Well, maybe not. The economy isn’t improving, in fact the consensus is coming back to the view that the
economy is still stagnant. But as I’ve said many a time here, bad news in the economy is good news for mortgage rates. Mortgage rates have nearly come full circle and we are at the outer edges of the low range we were in before the bond market tanked last month with the view that the worst was over for the economy and an impressive rebound was on the horizon. The view is still that we’ve seen the worst of the downturn, but the new reality is that there isn’t going to be much of a bounce any time soon. And that means lower rates are back in the picture. This means another opportunity for those who missed out on the low rates before. I’m now seeing more home buyers lock into their rates, and a pick up in refinances again.
Mortgage rates have been heading back down over the last few weeks, but the news this week kicked that trend into overdrive. The University of Michigan consumer sentiment survey fell sharply this week from 70.8 to 64.6. If consumers are feeling pessimistic, this means they won’t be in the mood to buy, and with consumer spending the biggest driver in the economy that’s not good news. Confirming this trend, retail sales were down 4.9% in June. But the biggest factor in rates moving lower was the good results on Wednesday from the 10 year Treasury Bond auction. With all the new government spending, both now and in the future, as a result of the stimulus plan, the mortgage bond purchasing program and a whole new round of spending, the government has had to raise money through issuing new debt. New debt is always a worry because it has to be paid off at some time. The concern has been that this run up in debt will cause the dollar to fall further and inflation to heat up. This auction was more important than others because the 10 year note is the closest approximation to a 30 year mortgage, and a good gauge of long term rates. The auction went way better than expected. The yield dropped from last month’s 4.0% to 3.30%. This means that bond investors are now expecting that long term rates are likely to remain low. Mortgage backed securities (which mortgage rates are priced off of) rallied, and mortgage rates fell. At the same time, oil rates fell on the world market this week, meaning less inflation. Mortgage rates have improved this week, but what happens next depends on what happens in the stock market. If the stock market falls there will be a flight to quality (bonds) and mortgage rates will fall back to their lows.
We are in the middle of Summer, but if you are a first time home buyer, you need to know that the seasons are changing and Winter will be here before you know it. The $8,000 first time home buyer’s tax credit expires after November 31st of this year, so if you are in the market for a home and fit the criteria for the credit, make sure you allow enough time to buy and close before the expiration date. This is especially true if you are looking at foreclosure and short sale properties which can take more time to close. The clock is ticking. If you are thinking of buying this year, make sure you get your Chicago mortgage pre-approval so you are ready and able to meet the deadline.
Here are the current Illinois Home mortgage rates for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates are based on the highest conforming loan amounts, which give the best pricing. Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me (Illinois mortgage company) and I’ll take the time to find the rate and program that is best for you:
Conventional loans up to $417,000
30 year fixed rate 5.125% 5.276% APR
15 Year fixed Rate 4.625% 4.744% APR
5-1 A.R.M. 4.25% 4.328% APR
For Jumbo loans over $417,000
30 Year Fixed Rate* 6.75% 6.897%
7-1 A.R.M. 5.375% 5.453% APR
(For smaller Jumbo loans another option is to break your loan into 2 parts – conventional to the limit and a HELOC or second mortgage for the rest.)
FHA LOANS – 3.5% down payment - FHA Maximum varies by County
With 1 point origination fee – 45 day lock
30 year fixed rate 5.00% 5.579% APR
With no origination fee – 45 day lock
30 year fixed rate 5.25% 5.568% APR
FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances
VA Veterans Administration 0 Down Loans
With 1 point origination fee – 45 day lock
30 Year Fixed Rate 5.00% 5.248%
Call for information on no-cost VA Streamlined Refinances
These are just a few of the mortgage programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.
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near their lowest levels of the last 40 years. Rates were so low because the economy was in free fall, and the Fed had made it its stated mission to keep mortgage rates low to stabilize the real estate market. After announcing that they would continue to buy mortgage backed securities (with a budget of 1.25 trillion dollars) the normally volatile mortgage rates market settled into a pattern so dull and boring that the rates became predictable. This range lasted for months, but all good things must come to an end, and as June came in the market swooned. Markets are ruled by emotion, and the fear of economic collapse was now gone, but the fear of inflation (from printing new money to pay for all the new spending) took hold. There was talk of green shoots, and many market participants thought the economy was about to rebound quickly. The stock market surged, and mortgage rates went up nearly a full point from their low to the high point. Mortgage refinances stopped over night, and while the purchase market kept on going, higher rates cut down on the purchasing power of many first time home buyers. But, déjà vu, we are now coming right back to where we were before the market tanked and rates are dropping again.
slide is over. There weren’t a lot of fireworks in the market since so many traders were taking the week off. On the good side, May factory orders ticked up 1.2% and the ISM index, a survey of purchasing managers throughout the country, showed an increase, suggesting more companies are running low on inventories and reordering. The Case Schiller index gave more evidence that housing is forming a bottom. Home prices are still going down, but at a much slower pace than before. On the downside, consumer confidence took a tumble again, falling another five points to 49.3. This is important because if consumers don’t feel confident they won’t spend money and it will be hard for the economy to recover.
letter detailed the new process that will streamline condo project approval and will open up a lot of properties which up until now have not been eligible for FHA financing. Over the last 2 years condo financing has become increasingly harder with tightening guidelines, restrictive mortgage insurance policies and loan level price adjustments which made condo financing much more expensive for anyone without a big down payment. Over the last 10 years almost all the condos in Chicago were financed with conventional loans and as more and more condo units came on the market through new construction or conversions from rental units, few of these properties applied for FHA project approval. The bright spot for many lower down payment condo buyers was the FHA spot loan. The
years was almost completely cut off from the news of the economy and world events. So the past week has been spent catching up, both at work and with the news of the day. In a way, not that much has changed since I left. The markets are still bouncing around and the economy is showing some rays of sun amid the gloom. The biggest change is with mortgage rates. When I left rates had risen to their highest point in the last six months as investors speculated that the economy was over the worst and poised for a dramatic recovery. We may be over the worst of the crisis, but the odds of a dramatic upturn are fading fast, and investor sentiment is turning from euphoric to cautious. Inflation is the biggest enemy of bond yields, and as the risk of inflation spiking soon disappears (with unemployment still rising inflation can’t take hold), mortgage rates are improving. Mortgage rates have already recovered about half the losses of the last month.
In other mortgage related news, HUD released a new mortgagee letter last week regarding FHA condo approvals. FHA has been the best option for most condo buyers with down payments of 10% or less, but even with the FHA spot condo approval process a lot of properties have been ineligible for FHA financing. This new program will open up the process and allow a lot of previously excluded properties to now offer FHA financing. It doesn’t go into effect until October 1st, but this should be a great and needed boost for the condo market. I will write more about this in the next few days.
statement following the end of their two day meeting today. Any Fed meeting is always a big event, but this one loomed larger than most. Over the last month mortgage interest rates have jumped nearly a full point (before settling down some over the last week) and putting an end to the refinance boom that had been chugging along since last December. The higher mortgage rates haven’t been enough to derail the purchase market, which has been driven by first time home buyers and helped along with an $8,000 government rebate. But the fear has been that if rates get much higher the purchase market will crash and the housing market will take another direct hit. All the experts agree that in order for the economy to improve, the housing market has to get better. Over the last few months there have been signs that housing is stabilizing, but with unemployment increasing this recovery is fragile. The Fed strategy has been to pump money into mortgage backed securities in order to keep rates low, but that was before inflation fears caused the bond market to melt down. So, all eyes were on the Fed to see what they were going to say, and what side they would come down on as to what our biggest problem was, inflation or the economic slowdown.
biggest challenge, and even the low 3.5% down payment that FHA requires can be a big hurdle to buying (Here are some ways to get together the down payment). But getting the money together for the down payment is only part of the problem. In addition to the down payment there are a lot of other costs you will need to come up with at the closing. Some of the items you will need to pay for include:
a lender takes on a new mortgage their goal is to minimize their risk and make sure that they are getting paid for the risks they are accepting. Some loan characteristics increase the chance that the borrower will default on their loan, costing the lender money. Over the last year Fannie Mae and Freddie Mac, the buyers of most conventional loans, have instituted a whole new series of price hits called LLPAs or loan level price adjustments, based on situations they consider more risky. This means that loans that fit into these situations will cost more than other loans. These price hits can be paid as extra fees at closing, or by increasing the rate on the loan.
mortgage loan officer, and they are helping you figure out how much of a home you can afford to buy, and what the best program is for your needs. I often start with a mortgage pre-qualification, which is usually just a conversation over the phone. I often start out the conversation by saying, we are going to play a game of 20 questions (sometimes it turns out to be more). The idea is that I will ask you everything about your jobs and financial situation, your future plans and goals. My questions are designed to find out all I can about a potential home buyer’s income, credit and assets. By going into depth, I am looking for both opportunities and red flags. If a red flag pops up and I see a problem of some sort, I will ask more questions to make sure I have the full story. Sometimes things that look like major problems can be easily solved with a little foresight. The other part of what I am doing is narrowing down the options, and figuring out what loan programs you can qualify for, and what programs would work best for you, both now and down the road.
if that is the case until after the fact, but there is no doubt that the market is buzzing now. Here are some of the reasons you should (especially if you are a first time home buyer) buy a home now:
Control – If you own your home, you can do what you want to with it. Have a dog? Not a problem. Want to plant a garden? Go for it. Want to paint stripes on the walls? Paint your heart out, it’s your home and you are in control.