April 2008

Odds and Ends – Random Thoughts from Your Illinois Mortgage Guy

The Check is in the mail – The first batch of economic stimulus checks are going out this week. Anyone who files a tax return up through October of this year is eligible, and with payouts of up to $600 per individual and $300 for each child under 17, this should cover several tanks of gas. What are you planning to do with your check? The idea behind the checks is the hope that if everyone goes out and buys something, this will kick the economy back in gear. There are of course, a few problems with this theory. First of all, not everyone is going to buy something. If you are feeling the economic pinch, you might rest easier putting this money in your savings account or paying off your credit cards. And those who do their civic duty and go out shopping are likely to buy foreign goods…

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Illinois Mortgage Rates Week in Review

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 25th, my take on the week’s financial news and how it affected Illinois mortgage rates. There were a lot of mixed signals in the mortgage backed securities markets this week, and the upshot is that we are back in a battle between inflation and recession. Whichever side wins, we already know who loses – the American consumer. For now, it looks like inflation has the advantage. Commodity prices have spiked higher and oil hit a record high this week. Signs of inflation are easy to find, especially at the gas pump and the grocery store. Any sign of inflation kills mortgage bonds and sends mortgage interest rates higher. The reason for this is that mortgage holders (lenders and loan servicers) know that their loan, if all goes as expected, will pay them back at a…

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How Much of a Mortgage Can You Afford? Down Payment and Asset Qualifying

In a recent post, I talked about how an underwriter looks at a borrower’s credit history, income and job history to determine how much of a mortgage they can qualify for. The other big part of qualifying for a mortgage is showing how much skin you have in the game, that is how much are you investing in the home, and where the money is coming from. We need to make sure you have enough money for your down payment and closing costs, and in some cases, money in reserve. Again, this all goes back to the idea of risk. Not so long ago it was common to buy a home with no money down. But that was before the real estate market turned down. Conventional lenders have now eliminated 0 down financing and you will, in most cases, need to have at least 5% of the purchase price for…

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Illinois Mortgage Rates Week in Review

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 18th, my take on the week’s financial news and how it affected Illinois mortgage rates. In last weeks review I said that the calm in the mortgage backed securities market was unlikely to last, and that I expected rates to make a move out of their range soon. On that count I was 100% correct. I did however think that the odds were that the move would be toward lower interest rates. I blew it on that call. Mortgage bonds tanked this week sending mortgage interest rates higher – though there was an impressive recovery on Friday afternoon which brought rates back from the brink. Last week the consensus was that the economy was softening and we had a ways to go before the credit crunch played out. This week traders are feeling more optimistic…

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How Much of a Mortgage Can You Afford – Qualifying for a Mortgage for Your Chicago Area Home

Are you just starting to look for a home in the Chicago area, and wondering how much of a home you can afford? There are all types of rules of thumb for how much of a home you can qualify for, but rules of thumb are simply estimates, not guidelines. It used to be that there was a hard set formula for how much of a loan you would qualify for, now the underwriting process is more technology driven and in many cases you can qualify for more of a mortgage than you can comfortably afford. But how much you can qualify for is just a first step. The mortgage you choose has to fit your life style and future goals, as well as your current financial situation. To find out how much of a home you can afford, and how much of a mortgage payment is right for you,…

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Illinois Mortgage Rates Weekly Update

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 11th, my take on the week’s financial news and how it affected Illinois mortgage rates. Over the last few months, the mortgage backed securities market has been extremely turbulent, moving back and forth in a wide range. This week we still had our ups and downs, but the range has narrowed. There were still a few days where wholesale lenders sent out intra-day re-prices, but overall this week was the flattest week we’ve seen in ages. We are sitting up near the top of the range for mortgage bonds, which means that mortgage interest rates are near the low point of the trading range. The question is, how long are we going to stay in these calm waters? Will we stay in this range, or are we about to break out of the range, either…

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Back to the Future – How the Mortgage Industry is Taking a Trip Back in Time, and What You Can Do to Make Sure Your Loan is Approved in Spite of the Changes

In the mortgage industry, the present is looking more and more like the past. Back in 1992 when I first got into the mortgage market, George Bush was finishing his last year in office (though he didn’t know it at the time), a Clinton was running to take his spot and Brett Favre had just been picked up by the Green Bay Packers. A lot has happened in between, but another George Bush is finishing his time in the White House, another Clinton is running for president and now that Favre has finally retired he is threatening to un-retire and continue his reign of terror against our beloved Chicago Bears. In the mortgage industry the future is looking a whole lot like the past, too. Back when I first started there were two types of loans which covered the majority of lending options – conventional and FHA. Conventional mortgages were…

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Illinois Mortgage Rates Weekly Update

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 4th, my take on the week’s financial news and how it affected Illinois mortgage rates. This week was a good example of how bi-polar our financial markets have become. At the beginning of the week UBS, one of the biggest investment houses on Wall Street and a big player in mortgage backed securities, announced a loss of 19 billion dollars from its sub prime holdings. To me this would be looked at as bad news. This is a huge loss and a scary reminder of how Wall Street feasted on this junk, and how vulnerable these outfits are now to the risk from it. But that was just my take, and I am after all just an amateur. The professionals looked at it differently. They looked at this as great news. If the big players…

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Can You Still Buy a Home in the Chicago Area with No Money Down?

Now that it’s April, I think it is finally safe to say winter is over here in the Chicago area. It’s been a long hard winter, and spring couldn’t come a moment to soon. But the baseball season has officially started, the sun is out and my phone is ringing with first time home buyers who are ready to take the plunge into home ownership. Yep, this is springtime in Chicago. First time home buyers Loan generally have two things in common. One, they are nervous about the home buying process and whether they will be able to qualify for a mortgage (especially now with all the economic uncertainty and the tighter underwriting from the mortgage mess), and two, they don’t have a lot of money saved up for a down payment. This wasn’t a problem a year or two back. Over the last few years 100% financing loans were…

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