March 2008

Illinois Mortgage Rates Weekly Update

Welcome to Illinois Mortgage Rates and News week in review for the week ending March 28th, my take on the week’s financial news and how it affected Illinois mortgage rates. There is a certain kind of action movie where the hero (heroine?) moves from one disaster to another, each time escaping just in the knick of time, but only momentarily before falling into even worse peril. That’s what the mortgage market has been like over the last 6 or 8 months, edge of the seat excitement and cliffhangers galore. Since the Sub Prime bubble popped, it’s been week after week of fear and excitement, companies imploding, mortgage programs eliminated, rate cuts and the mortgage rates moving up and down so fast it is hard to keep track. Compared to what has been going on, this week was uneventful and almost boring by contrast. Does this mean the markets are starting…

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Illinois Mortgage Rates Weekly Update

Welcome to Illinois Mortgage Rates and News week in review for the week ending March21st, my take on the week’s financial news and how it affected Illinois mortgage rates. The biggest story this week was what didn’t happen. At the end of last week the Fed stepped in to engineer an emergency bailout of Wall Street giant Bear Stearns. The company was near death as a result of its cash crunch and their heavy position in Sub Prime mortgages. It turned out that the Fed bail out was just triage, a temporary solution to the problem. Over the weekend the Fed worked with JP Morgan Chase, an even bigger Wall Street giant, to put together a deal to take over Bear Stearns and keep it from bankruptcy. The deal was put together and the news released on Sunday afternoon, right before the Asian markets opened. The surprising – no, make…

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Why FHA May be the Best Option for Chicago Area Home Buyers – Even Those Who Can Qualify for a Conventional Mortgage

Not so long ago, FHA loans were the red-headed step child in the housing market. They didn’t get any respect. That wasn’t always the case. Back in the old days FHA loans were the only option for most first time home buyers or others who had little money to put down. FHA was the way for many borrowers to take their first steps into home ownership here in the Chicago area. Not only could you buy a home with a small down payment, but the entire down payment could be a gift, and your credit didn’t have to be perfect. There were problems with FHA loans, though. It took longer to get a loan approved and closed than with a conventional loan, and if there were issues with the homes condition (like peeling paint) the issues had to be fixed before closing. Many people felt that FHA underwriters were professional…

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Illinois Mortgage Rates Weekly Update

Welcome to Illinois Mortgage Rates and News week in review for the week ending March14th, my take on the week’s financial news and how it affected Illinois mortgage rates. Do you remember the scene in It’s a Wonderful Life where they had the run on the bank? In the movie Jimmy Stewart was on his way out of town, just about to go on his honeymoon, when he noticed the crowd of people swarming around the Building and Loan. The rumor was that the bank was out of funds, so the town’s people were in a panic as they tried to get out with whatever they could before they lost everything. Jimmy stepped in and calmed the people by doling out his honeymoon savings and assuring them that they were all in this together. We had a similar situation in the mortgage backed securities market this week with Fed Chairman…

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The incredible Shrinking Mortgage Market

Not so long ago the mortgage market was a lot like Baskin Robins 31 Flavors Ice Cream – a flavor for every need or taste. You wanted Rocky Road or Lemon Custard? No problem. A 5 year fixed payment Jumbo option ARM or a 30 year fixed rate with interest only payments for the first 10 years? Those were on the menu, too. Now that the credit crunch has hit the mortgage market full force, the mortgage options have shrunk. Borrowers can still get their ice cream, but they better like Vanilla. The mortgage market has been dysfunctional ever since the Sub Prime melt-down last summer. Price swings, both up and down, have been exaggerated. Mortgage options have disappeared and credit and appraisal guidelines have tightened. Some of the biggest mortgage lenders in the country have been on the ropes, unsure if they will stay in the business. Throughout all…

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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. I think it is safe to say that the mortgage system is officially broken. Mortgage rates are determined by the buying and selling of mortgage backed securities (MBSs), a type of bond backed by home mortgages. They trade on an open market and, like stock prices, go up and down by supply and demand. Mortgage bonds have always been looked at as one of the safest investments around. They paid slightly higher yields than Treasury notes, which are backed by the Federal Government, but the biggest risk with mortgage bonds was that interest rates would go down and the loans would pay off early, lowering the over all yield. Over the last year, ever since the sub prime mess hit the fan, there have…

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FHA announces New Loan Limits for Chicago and the Surrounding Areas

FHA just released their new loan limits for Northern Illinois and the Chicago area. This determines the maximum loan for FHA financing in Cook County, Dupage County, Kane County, Lake County, Will County and McHenry County. The limits are: 1 unit $410,000 2 unit $524,850 3 unit $634,450 4 unit $788,450 This is great news. As underwriting for conventional loans has become progressively tighter, FHA is shaping up to be a great alternative. Some of the advantages of FHA financing include: 3% down payment required – the down payment can come from a gift from a relative or as a grant from a down payment assistance program, so the buyer can come in with no money out of their own pockets. FHA allows a seller concession of up to 6% – this allows more creative ways to structure your purchase, including ways to buy with no down payment or closing…

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Jumbo Mortgages in Illinois – Options to Keep Your Interest Rate and Payments Down

If you are a home buyer here in the Chicago area or around Illinois, and are looking for a Jumbo mortgage, your options aren’t what they used to be. A Jumbo loan is a mortgage higher than the conforming loan limit set by Fannie Mae and Freddie Mac, the two big purchasers of loans on the mortgage after-market. The current Fannie Mae limit here in the Chicago area is $417,000 for a single family home, so anything above that is considered a Jumbo mortgage. Because these loans aren’t covered by Fannie and Freddie, Jumbo loans are considered slightly riskier than conventional loans and have always been a little more expensive. Last summer, before the credit crunch (also known as the sub-prime melt down) hit the mortgage industry, the premium on a Jumbo 30 year fixed rate was just a ¼ point higher than a conforming fixed rate. This made sense…

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