February 2008

Illinois Mortgage Rate Weekly Update

Welcome to this week’s Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates. The great physicist Isaac Newton described gravity by noting, what goes up, must come down. This week gravitational forces were at play in mortgage interest rates. After moving up strongly (and strangely) most of the month, mortgage rates are now falling like the proverbial apple. Mortgage rates jumped up based on fear of inflation. The strange part of this has been that inflation may be a problem down the road, but the credit crunch and recession are crucial problems now. As Fed Chairman Bernanke said in congressional testimony this week, “You fight the enemy in front of you, not the one over the hill.” Inflation may become a problem, and there are signs of inflation especially in fuel and food costs, but it is…

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When Does it Make Sense to Take Out an ARM? – Four Good Reasons Why an Adjustable Rate Mortgage Can Save You Money When You Purchase Your Home

With the rates on fixed rate mortgages moving higher over the last few weeks, adjustable rate mortgages (ARMs) are suddenly popular again. Right now there is a huge spread between the rate on a 30 year fixed rate mortgage, and a 5-1 ARM, which is fixed for the first five years before it can adjust. The difference in rate now is 7/8s of a point, which is mind boggling huge. On a $300,000 loan this comes out to a savings of $166 per month. This spread means a home buyer here in the Chicago area can save thousands of dollars in payments by going with the adjustable instead of the fixed rate. But the savings come at a cost. By taking on an ARM, you are taking a risk that rates may be higher down the road, and if you are still in your home, and still in your mortgage,…

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Should You Refinance Your Adjustable Rate Mortgage?

Do you have an adjustable rate mortgage that is due to adjust this year? If so, you’ve got plenty of company. There are a lot of Adjustable Rate Mortgages (ARMs) resetting this year. I’ve seen estimates as high as one trillion dollars worth – that’s one with twelve zeros behind it! That is serious money, and I’ve read a lot of commentary about how damaging this could be to our economy this year. But if you have an ARM, should you be worried that your interest rates are going to go pop up and make your payment unaffordable? Probably not. Rush out to illinois mortgage refinancing ? Not necessarily. In a lot of ways ARMs have gotten a bad rap. To see how an ARM reset would affect you, you need to understand how an ARM works. The most popular versions are what is called hybrid ARMs, these are a…

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Illinois Mortgage Rate Weekly Update

Welcome to this week’s Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates. This has been a brutal week in the mortgage bond market. Mortgage rates spiked to their highest point of the year this week before turning around and heading lower on Thursday. But by Friday afternoon the bad old market had returned and we were once again heading in the wrong direction. Brutal. The market trend is a surprise to most consumers. The Fed has aggressively lowered short term interest rates over the last few months, and the general perception is that interest rates are low and heading lower. Short term rates are, but not mortgage rates. The spread between the lowest mortgage interest rate we saw after the Fed made their surprise rate cut last month, and the highest rate we saw this week,…

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Tax Benefits Make Real Estate a Smart Investment for Chicago Area First Time Home Buyers Loan

Have you filed your taxes yet? Are you writing out a check to the IRS, or getting less of a refund than you expected? If you are still renting, you are probably paying more in taxes than you should. In previous posts I’ve gone over other financial advantages of owning your own home – how you gradually build equity in your home as you pay down your mortgage, and how appreciation can build wealth as your property goes up in value over time. But one of the key benefits of owning real estate, here in the Chicago area or throughout the country, is that paying your Home Mortgage puts a little more cash in your pocket through tax deductions. Strong communities have high rates of home ownership. Home owners take pride in their homes and protect their investments by taking an interest in their schools, local government and the health…

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Illinois Mortgage Rates Weekly Update

Welcome to this week’s Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates. Wow! It doesn’t seem all that long ago that mortgage rates were dropping and it looked like we were going to test the all time lows of a few years back. Actually, it wasn’t that long ago, though 3 weeks in this kind of market can feel like forever. Markets move on sentiment. When things are good they are unbelievably good, and the future couldn’t be rosier (Do you remember the term ‘irrational exuberance’?). On the other hand, when fear is in the air you better be careful or you’ll get trampled by the herd as they run toward the nearest cliff. That’s where we are now. Mortgage interest rates are getting down right ugly (comparatively, anyway). Fixed rate mortgages jumped to their highest…

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For First Time Home Buyers – Renting is Dating, Buying a Home is Marriage

(In honor of Valentines Day, here is a repost from last year) It’s all about commitment. If you are a first time home buyer – that is, if you are thinking about becoming a first time home buyer but you are renting now – this is a big step. You probably have some serious commitment issues. Renting is a casual fling. You probably like the place you live in now. Maybe it has a pool and a rec-center that you’ve been meaning to use, but never find the time. Maybe it’s in a great location, close to work and in an area with a good night life. For one reason or another, the place has its charms. It was just what you needed when you first moved in. But now… now, it seems constraining. Maybe even childish. You’ve outgrown it. Not only have you outgrown it, but you have friends…

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Why Buying Your Own Home is a Smart Move for Chicago Area First Time Home Buyers – Real Estate Appreciation

If you are a first time home buyer thinking of buying a home here in the Chicago area, you are probably asking yourself, why would anyone want to buy a home in today’s market? Fear is in the air and it is a scary time to buy. The news is filled with talk of foreclosures and declining markets. Although the Chicago area has remained stable, real estate prices have fallen sharply in many areas of the country. If you buy a home now, how do you know that prices won’t fall lower? The truth is, you don’t. But if you have good reasons to buy (You need more space, growing family, moving up in your job … whatever, you know your reasons), and you are planning for the long term, now could be a great time to buy a home here in the Chicago area. Mortgage rates are low now…

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Illinois Mortgage Rates Weekly Update

Have you heard of the Law of Unintended Consequences? The idea that when you try and do something good, something entirely unforeseen results from your actions? This is a variation on Murphy’s Law, whatever can go wrong, will go wrong. I think we are seeing a great example of this in the financial markets. Conventional wisdom now tells us several things about the economy: 1 – Our economy is almost surely now in a recession. 2 – The recession is largely a result of all the problems in the real estate market. 3 – In order to get our economy back on track, we need to get the real estate market moving again. 4 – One of the best ways to get the real estate market moving again is through lower interest rates. Makes sense, right? The Fed has moved aggressively to cut short term rates – cutting an astounding…

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Why Buying Your Own Home is a Smart Move for Chicago Area First Time Home Buyers

As we head into the Spring home buying market, first time home buyers in the Chicago area and throughout Illinois will be making their first tentative steps toward buying a home of their own. It’s conventional wisdom that buying a home makes sense, even now with all the bad news on the housing front. But the question is, does owning a home make sense for you? Some of the reasons you might want to buy are more intangible but emotionally compelling – the pride of having a place of your own, a chance to establish your roots, the joy of having a real home where you can express your own personality and style. These are real reasons for buying your first home. But the some of the best reasons to buy may be financial. In fact, buying a home may be the smartest financial decision you will make in your…

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