One of the provisions of the recently signed Housing Bill, was the elimination of the Down Payment Assistance Programs (DPAs) like Ameridream and

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Nehemiah. These programs were a legal loop hole which allowed sellers, in a round about way, to fund the buyer’s down payment and allow them use an FHA loan to buy with no down payment from their own pockets. The DPAs have been a great deal for home buyers who didn’t have extra cash saved up for a down payment, and it’s been a great deal for home sellers because they brought in home buyers who otherwise wouldn’t have been able to buy a home. The down side has been that FHA has linked the DPAs to a higher default rate, and they’ve been trying to shut them down for years. Ameridream and Nehemiah contest the default figures, and claim that the defaults are more a function of fraudulent loans than problems with the down payment programs. Their claim is that administered properly, this is one of the best ways to bring low and moderate income buyers into homeownership and they have helped hundreds of thousands of families get their piece of the American dream. The DPAs have fought off court challenges and evaded death in the past, but it looks like this time it’s for real.

My experience lines up with the DPAs. The toughest part of qualifying for a mortgage has always been saving up the money for a down payment. I know that I’ve helped lots of otherwise well qualified buyers who without this program would have been out of the home market entirely. I also know that most of these buyers continue to pay their mortgages on time, and some of the buyer’s who started off with this program have gone on to use the equity they’ve built up to buy bigger homes – just like those homeowners who started out with large down payments. I’ve also known people who bought with larger down payments but ended up having financial problems down the road. I think most mortgage defaults are based on traumatic events like job loss, medical problems and divorce, than the size of their original down payment.

Another thing I’ve been seeing lately, now that FHA has increased their loan limits here in the Chicago area, is buyers using FHA and DPAs to buy up into a move up home. I have two clients I am working with now who are selling their homes, but because of the softness in the real estate market they need to bring money to closing in order to pay off their current mortgage and closing costs. With no money for a down payment they would be frozen out of buying. The DPAs allow them to start over again and not have to become renters again. Having a hefty down payment is always preferred, but this seems like a tough time to take otherwise good buyers out of the housing market.

So if you are looking to buy a home but you are short the down payment, this might be your last chance to buy. The new housing bill goes into effect on October 1^st. . This means you need to buy a home and close on it by September 31^st or you are out of luck. With 2 months this is plenty of time to find a home and to get a mortgage, but you need to act fast. If you are thinking of buying a new home here in the Chicago area or throughout Illinois, give me a call and we can go over your situation and get you pre-approved. You can still buy with no money down, but the train is pulling out of the station and you will have to act fast.

Illinois Mortgage Rates and News

Click here if you would like to add your name to a petition to keep the DPAs in place. It may be too late, but it is worth a shot.

Click Here to Read more about first time home buyers loan  

The Housing Bill – The Housing and Economic Recovery Act of 2008 was passed by the Senate on Saturday and is expected to be signed into law sometime this week. The bill will actually take effect on October 1st. There have been a lot of rumors as to how this will shake out, but these are some highlights of what has been agreed to and will be in the new bill:

• A bailout of Fannie Mae and Freddie Mac, raising their debt ceiling and authorizing the government to purchase their stock as needed in order to keep them afloat. They are also now subject to more regulation than in the past.
• Foreclosure relief for some homeowners who bought in the last few years. The lenders have to approve it, so in a way this provides an option for a short-refinance. It will only work if the lender goes along with it and the borrower will have to split their equity with FHA if they sell their home for a profit at some point down the road.
• FHA will raise their minimum down payment from 3% total investment to 3.5%.
• FHA will eliminate the down payment assistance programs or DPAs (Nehemiah and AmeriDream) which allowed seller concessions to be used as a way for home buyers to buy with no money down.
• A 12 month moratorium on the FHA risk based pricing, which just went into effect 2 weeks ago.
• A tax refund of up to $7,500 for first time home buyers – but this will have to be paid back over the next 15 years, so it more of an interest free loan than a refund.
• A streamlined approval process for FHA condos.
• The maximum loan limits for both Conventional and FHA financing will change based on the median home price for the area, it’s still not certain what it will be here in the Chicago area.
• A nation wide licensing system for loan originators – we already have this in Illinois.

Some of this is going to be good for the market, but things like increasing the minimum FHA down payment and doing away with the down payment assistance programs will make it harder for otherwise qualified people to buy. There is talk that a separate bill will try and resurrect the DPAs, but once they are gone it will be harder to bring them back. If you are looking to buy a home here in the mortgage chicago il area and you lack the down payment, this may be your best chance to buy. A Down Payment Assistance program combined with an FHA loan is still a way to buy with no money down, but you will need to close by September 30th.

There is a lot more in the bill – it is over 700 pages long. A lot of what this means will be open to interpretation and clarification down the line. I’ll keep you informed as I hear more details.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending July 25th, my take on the week’s financial news and how it affected Illinois mortgage rates.

There was a fair amount of mortgage related news this week, and even more rumors. The economic news was again mixed, and the big question in the mortgage backed securities markets is which battle should we be fighting, recession or inflation. The answer changes from day to day, and mortgage rates continue to be wildly volatile. We had three days where mortgage rates went down, two where they went up and the week ended with mortgage rates getting worse, but slightly better than where we were at the end of last week.

Oil prices continued to fall. The price per barrel is down to $123, about $25 less than it was just a few weeks ago. If the trend continues, this by itself should take the edge off inflation. The economy is still weakening. Initial jobless claims came in much higher than projected and are now at recessionary levels. Existing Home Sales came in lower than expected and the sale price for an average home is down about 6.0% from where it was a year ago. These are all signs that bolster the recession argument. On the other hand, Durable Goods (big ticket items from refrigerators to airplanes) rose slightly when they were expected to drop by a lot. New home sales bucked the trend of existing homes and though sales were still down, they had the best month in ages. The inventory for unsold new homes is now around 10 months supply.

The biggest surprise might be the consumer sentiment. The Michigan index was revised from 56.4% to 61.2%. If people are feeling better about their prospects they are more likely to go out and spend money, which feeds into the fear of inflation angle. A friend at work pointed out something that I hadn’t noticed before. Have you been to the grocery store lately? Have you noticed anything funny with the ice cream? The packages have gotten smaller. Instead of half-gallons they are now 1.5 quarts. This is inflation in action, maybe in a way that you don’t notice at first. At least not until you realize there are fewer scoops in the carton. So again, inflation is real and it is a concern.

 But let’s look at that other hand again. One of the big reasons our economy was so strong for so long was because home prices were strong and with home equity loans and cash-out refinancing homeowners were tapping into their equity to pay for home improvements, and new purchases. That has disappeared completely. Not only are mortgages harder to get, but home equity loans are on the way to becoming an endangered species. If people don’t have the equity to spend that means they are going to spend less. It seems to me we are in a very two-faced economy. Asset prices are moving lower and the credit crunch is still choking off growth, but prices for many items are still moving up. The consumer index was up, but I wonder if this was a one month trend or the mark of a true reversal.

The big news this week was the house passing the housing bill – and since it hasn’t been completed yet the rumors are still circulating. It was getting some resistance in the Senate from some die hard Republicans in the Senate, but it is expected to be passed quickly and the President has promised to sign it. The bill props up Fannie Mae and Freddie Mac by giving them an essentially limitless line of credit, gives some help to homeowners on the brink of foreclosure, and gives a boost to the housing market in several ways. I will have a full post on the particulars shortly.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans 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 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    6.50%    6.634% APR

15 year fixed rate    6.00%     6.143% APR

5-1 A.R.M.               5.75%     5.867% APR      

7-1 A.R.M.               5.875%   5.989% APR

For Jumbo loans over $417,000

30 year fixed rate*   6.50%    6.634% APR – SPECIAL PRICING –

Requires 25% down payment

7-1 A.R.M.*              6.00%    6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS – 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate    6.50%      7.278% APR

With no origination fee –        60 day lock

30 year fixed rate    6.75%     7.296%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the 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.

Next week will be a big week in the markets as some of the most anticipated data is released. Whether this gives a clear picture of which way we are heading, or if we continue the up and down pattern we don’t know. But I can guarantee that it will be volatile.

Illinois Mortgage Rates and News

If you’ve been paying attention to the news, you know that the real estate market is tough. Homes are taking longer to sell and selling for much less that they would have just a year or two ago. Many of the Realtors I speak with are still making their adjustments to the new market and trying to find new ways to generate a paycheck. I met with one Realtor last week who offered me the chance to get in on the ground floor of a multi-level marketing program he was considering. But the market isn’t bad for everyone. As two news stories from last week show, with a little bit of luck and ingenuity real estate is still a winner.

Flipping houses for a profit is harder to do than it was in the past, but Donald Trump managed to eke out some coin when he sold a Palm Beach property, Maison de l’Amitié, for a reported $95,000,000. Trump had been bragging that the sale was for $100 million, but according to the Palm Beach Post last minute negotiations brought the price down when Trump agreed to pay the closing costs (seller concessions work, even at the top price range). The buyer was a Russian billionaire and the price he paid was the highest sale price for a single family home in the United States (though I’m sure a few families could comfortably live there). Trump bought the home for a little over $41 million in 2004. Not a bad profit. As Trump himself told reporters, "I love breaking records, and this is a record. In an age of so many people getting hurt in real estate, it shows that you can still do well in real estate.” I’m not sure what the moral is here, that the rich get richer, or that if you are selling your home you might want to let some Russian billionaires know about it.

The other story was much closer to home, in Lake Bluff, Illinois. This story concerns another real estate developer, George Michael, who was intent on finding ways to lower the costs on his property. One of the biggest costs associated with real estate is real estate taxes. According to the Chicago Tribune, Mr. Michael creatively decided to reduce his expenses by cutting his tax bill to zero. He did this by converting his $3 million dollar lakefront mansion into a church for a tax savings of $80,000 per year. The church, the Armenian Church of Lake Bluff, isn’t open to just anyone. There are no trespassing signs posted throughout the property and it is mostly family members in the congregation. His plan might not work long term, though. The village of Lake Bluff is saying the church failed to get proper permits and had no authority to change his home into a church. This one may end up in court.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending July 18th, my take on the week’s financial news and how it affected Illinois mortgage rates.

This was a brutal week for mortgage bonds, and mortgage rates. After a false start where rates recovered on Monday, the rest of the week mortgage bonds got demolished and fixed mortgage interest rates rose about 3/8s of a point to the highest they have been all year. Mortgage bonds got hammered even as some of the factors that had been responsible for the recent rise in rates seem to be turning. Oil prices fell sharply this week down to $128 per barrel, the dollar strengthened, the Government announced a plan (sort of) to maintain Fannie Mae and Freddie Mac and insure that they stay solvent. These were all factors that in normal times would have propped up mortgage bonds and lowered mortgage interest rates. The CPI (Consumer Price Index) came in high at a monthly increase of 1.1%, which flashed the red light danger sign of rampant inflation. And several of the Fed governors as well as Chairman Bernanke made statements that inflation was their biggest concern. But much of this was looking in the rear view mirror. The economy is soft, credit is still tight and consumers have no purchasing power. The softness in our economy has spread over seas and China and India, the fast growing economies that have fueled the growing demand for commodities world wide, are now slowing down. Many experts think that this will bring down the inflation level in the coming months. So why did rates get so bad so quickly this week?

There is a psychological term called selective perception which states that how someone expects something to turn out will change the way that they perceive what actually does happen to them. This concept was proved by experiments showing how college students would get drunk when they were given what they were told were potent drinks, even though there was no alcohol in them. It is also why liberals and conservatives react so differently to the same information. I think we are seeing a great example of this in the stock and mortgage bond markets now. Money flows back and forth between stocks and bonds based on investor’s view of the economy. When the economy is growing and the view is optimistic the stock market usually benefits. When the economy is tanking and there is fear in the air money rushes into bonds, which means lower interest rates. This week was a great week for the stock market. The Dow Jones average gained 3.6% after a rally that was the biggest in five years. PP Morgan Chase and Wells Fargo came in with earnings better than expected and the market is now thinking that the worst is over for the big banks.

This may be wishful thinking. Coming a week after Indy Mac failed, and days after the potential bail out of Fannie and Freddie was announced, the market may be getting ahead of itself. Merrill Lynch announced another $9.7 billion in credit write downs which says that the credit crunch is still not over. With home prices down and less access to the home equity, we are seeing a reverse of the wealth effect. People feel poorer and they are less likely to spend money if they don’t have to. The stimulus checks have mostly been spent, and this kept the economy out of an official recession, but the pop is now gone. The stock market had a great week, but my guess is that fear will set in again over the next few weeks, and the pattern will reverse itself with money flowing out of stocks and into bonds. I expect that rates will come back down again in the coming weeks.

If you have a contract on a property or if you are in the market for mortgage financing, you may want to look at the adjustable rate mortgages. ARMs are available with fixed terms of 5, 7 and even 10 years before they become adjustable, and the initial interest rate is much lower than the fixed rates. Some of the banks go in and out of the market with their ARMs, but it is worth comparing the programs, especially if you don’t plan to be in the home for a long, long time. If rates come down you can refinance into a fixed rate for little or no upfront cost.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans 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 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    6.625%   6.724% APR

15 year fixed rate    6.00%     6.143% APR

5-1 A.R.M.               5.75%     5.867% APR      

7-1 A.R.M.               5.875%   5.989% APR

For Jumbo loans over $417,000

30 year fixed rate*   7.00%    7.147% APR – Requires 20% down payment

7-1 A.R.M.*              6.00%    6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS – 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate    6.50%      7.278% APR

With no origination fee –        60 day lock

30 year fixed rate    6.75%     7.296%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the 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. The market has been unbelievably volatile and I expect that this volatility will continue.

Illinois Mortgage Rates and News

I’ve received 4 calls this week from home buyers looking to buy condos in Chicago and the Chicago suburbs. With more condos on the market than at any time over the last several years this is a great time to buy. This means there is more of a selection to choose from, and the competition is bringing condo prices down. This is a great time to buy a new condo, but changes in the mortgage market have made financing condominiums harder than it used to be. Mortgage guidelines have gotten much tougher and mortgage insurance companies are even tougher. Fannie Mae and Freddie Mac have junked their declining market policy, but the mortgage insurance companies have kept the policies intact. What this means is that in declining markets the mortgage insurance companies require an extra 5% down payment in order to take on the loan, so if you were going to put down 5%, you would now need to have 10% for a down payment. Chicago and the entire Chicago area are now listed as declining real estate markets. The net result is that if you are going to buy condo anywhere in the Chicago area, and you are going for conventional financing, you may need a 10% down payment.

These new requirements are going to make it harder to finance Chicago area condos, but there is one way you can still buy with a minimal and in some cases no down payment. FHA financing allows a 3% down payment and this money can come from not only your own funds, but a gift from a relative or a grant from a down payment assistance program (at least for now). There’s only one catch. When you buy a condo with FHA financing, the condo needs to be approved by FHA. There are a lot of condominium complexes and buildings that are FHA approved, but most of these are older properties. Many of the condo units have been built or converted to condo in the last 5 years, and during this time FHA was looked at as a dusty old program with loan limits too low to even worry about. So the developers never applied for the FHA approval. But things have changed since then. The FHA loan limit in the Chicago metropolitan area has been raised to $410,000, and FHA now is able to approve more buyers than any other program. If you are looking for a condo the first thing you should do is to see if the property you are looking for is already FHA approved. There is a HUD web site where you can search for properties by address and zip code, to see what is already approved. If you have a question or want to see what FHA condos are available in your town, contact me illinois Mortgage Company first time home buyers loan and I’ll be glad to run the search. IF you are interested in a property that isn’t on the list, there is another option. FHA offers a way to approve condos units one at a time with a spot loan.

FHA spot loans are designed to make FHA financing available to home buyers in successfully run condo buildings which have not gone through the approval process. From the FHA guidelines, the following requirements must be met to approve a spot loan:

• The condominium project must be complete, including all common areas and facilities.
• Control of the common areas must have been turned over to the homeowners
• association for at least one year.
• The owners association must provide evidence that the project has the appropriate
• hazard, liability and flood insurance.
• Individual units in the project must be owned fee simple. The project’s legal documents must provide for undivided ownership of common areas by unit owners.
• The project’s documents should not place any legal restrictions on conveyance. Any provisions that seek to limit the free transferability of title is unacceptable. Such restrictions include rights of first refusal and restrictive covenants.
• At least 90% of the units in the project must have been sold.
• At least 51% of the units in the project must be owner occupied.

• No single entity may own more than 10% of the units in a project. The 10% restriction does not apply when the ownership of less than three units would disqualify an otherwise eligible project. The Department recognized that the 10% cap on the number of units that may secure FHA insured mortgages in a given project can place a small regime at a disadvantage, since only a few units will invoke the limit. Accordingly, a two tiered system was established. For condominium projects having more than 30 units, no more than 10% of the units may have FHA insured loans at any given time.

First Time Home Buyers Loan | Chicago FHA loans

Condominium projects consisting of 30 units or less, can have up to 20% of the units encumbered by FHA insured mortgages under the spot loan rule.

It’s up to the mortgage lender (that would be me) to gather the correct documentation to show that the condo project meets all the eligibility criteria. Once we have all the documentation this would be submitted to the underwriter along with the rest of the file. Putting together an FHA spot approval takes a little more time and effort, but it allows home buyers to buy a condo they couldn’t buy with a conventional loan. In this market it may be one of the best tools available, for condo buyers and sellers alike.

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Illinois Mortgage Rates and News

The stock and mortgage bond markets were in turmoil last week as rumors circulated that Fannie Mae and Freddie Mac were on the edge of insolvency. Not just the mortgage market but our entire economy are dependent on the health of these organizations. It’s always been assumed that the government would do whatever was necessary to keep them afloat. The question was more a matter of what they would do to support them, whether the stock would remain solvent and who would foot the cost.

Tonight the Fed stepped in and announced a deal had been put together, just before the Asian markets opened. This was the same way they put together the Bear Stearns buy out in March, and like then it was designed to calm the markets and avoid a sell off that could have gotten out of control. This deal will increase the Treasury credit line for Fannie and Freddie, and  gives the Treasury the authority to buy the companies stocks.

By promising bold action the Fed and the Treasury hope to re-instill confidence, in the hopes that they won’t have to do a full scale bail out down the road. Here’s a Wall Street Journal Article which gives the specifics.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending July 11th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Back in March our economy barely dodged a bullet when the Fed engineered a bail out of Wall Street giant Bear Stearns. If left to fail on its own, it was feared that this would set off a panic that could shake our financial system to its core. Since then we’ve been told that the worst was over, and even though the housing market was still a mess, our economic foundations were strong. This week the bullet we missed with Bear Stearns is looking like a pea from a pea shooter, and we have a nuclear missile headed our way (Where is Superman when we need him?) The stock of Fannie Mae and Freddie Mac, the two pillars of our mortgage finance system, dived this week as the loss of liquidity pushed these giants toward insolvency. Both stocks lost about 45% of their value this week and are down about 90% in the last year. With the stock prices this low there is no way they can raise the cash they need to continue operating in the markets. If the worst comes to pass, this means 2 possibilities: a bailout where the government funds the organizations, or a receivership or complete government takeover.

Fannie and Freddie are unique in the way they operate. They are publicly traded corporations but they are backed with the assurance of the federal government. Their mission is to buy up mortgage loans and insure that there is always money available to fund new mortgages. Combined they guarantee about 5 trillion dollars (that’s 5,000 billion) worth of mortgage loans – about half the total mortgages outstanding. To say they are the 800 pound gorillas in the mortgage market is an understatement. The panic started this week with rumors that the government was preparing a plan to step in if needed. Fannie and Freddie have lost a lot of money due to bad loans, but they still have a fair amount of money in reserve, though no where near enough to settle all the possible problems. But this isn’t news. Over the last years Fannie and Freddie have branched out beyond their core business and have moved farther along the risk curve as they tried to keep profits high while the real estate market was booming. Commentators have been saying for years that the companies were undercapitalized. So this isn’t a new thing.

Everyone agrees that Fannie Mae and Freddie Mac are too big to fail. If it gets to that point the government will surely step in and do what is necessary to keep the mortgage market going. But the question then becomes how would they do this? The debt is so huge (even backed by the homes supporting all those mortgages) that it would be equal to almost ½ our current national debt. After the panic first started, Fed officials, Treasury Secretary Paulson and statements from both Fannie and Freddie assured everyone that there was no crisis. But a panic is a panic. The market calmed down a little Friday afternoon, but this will come back as an issue. Maybe this coming week, maybe later. We are still in a severe credit crunch this fear only tightens it another notch. What it means for consumers is that conventional mortgages are likely to continue their trend of becoming harder to qualify for and more expensive for those who can qualify. On the good side, there is almost no chance that the Fed will hike rates any time soon.

The news of the troubles with Fannie and Freddie obscured some other big news. IndyMac, a big California bank which was one of the big players in what was called the Alt A mortgage market, went bust this week. This was the first major bank to fail in years, and the 3^rd largest bank failure in US history. The expectation is that there are other banks teetering on the edge, and more failures will be coming. In other news oil was up again, closing the week at $145 per barrel. Pending home sales came in worse than expected and according to RealtyTrac the number of foreclosed homes nearly tripled June.

Mortgage backed securities, which control the direction of mortgage rates were improving sharply most of the week, but turned around and gave up most of their gains on Friday. Mortgage rates are a little better on some programs, and on others unchanged. FHA is due to change to their risk based pricing model this week, but all in all it is the biggest bargain in the mortgage market. For many borrowers with less than 20% equity, or credit scores under 720, FHA financing is the best option. Here in the Chicago IL. area the maximum loan amount is now $410,000, so it fits what most borrowers need.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans 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 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    6.25%   6.364% APR

15 year fixed rate    5.75%   5.922% APR

5-1 A.R.M.               5.50%   5.678% APR      

7-1 A.R.M.               5.875%   5.989% APR

For Jumbo loans over $417,000

30 year fixed rate*   6.75%    6.877% APR – Requires 20% down payment

7-1 A.R.M.*              5.75%    6.062% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS – 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate    6.125%     7.048% APR

With no origination fee –        60 day lock

30 year fixed rate    6.375%     7.056%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the 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.

Illinois Mortgage Rates and News

I had breakfast this morning with a Realtor who was having a difficult time with one of her listings. She had a contract on the house and the buyer was pre-approved for the mortgage before they wrote the offer. Everything looked like it was set for a nice smooth transaction. When the financing date in the contract came due the buyer still didn’t have loan approval, so they requested an extension. She was assured that the borrower was great and the appraisal came in right where it needed to be. There were just a few small details to take care of and loan approval would be forthcoming. 10 days later when the extension was up, they still didn’t have a loan approval. The loan officer was vague about what the problems were, but promised that it was nothing serious and with a little more time everything would be fine. By this time the Realtor was nervous and the seller was a basket case. But in for a penny, in for a pound, they agreed to a second extension rather than put the property back on the market. You can guess where this story is going. The second financing extension came and went with no loan approval. Now the loan officer isn’t answering his phone and all the calls to his company end up in voice mail and no one is returning phone calls. Many home buyers think of mortgage financing as a commodity, but this Realtor knows that isn’t true.

On the other hand, mortgage rates can be looked at as a commodity. Mortgage options have narrowed and most loans are now either conventional loans insured by Fannie Mae or Freddie Mac, or FHA government insured loans. The rates on these loans are determined by action in the mortgage backed securities markets, and wholesale lenders react to changes in these markets in unison. On the consumer level, mortgages rates are extremely competitive. What this means is that mortgage rates, no matter what the source, are going to be very similar from one lender to another. There will be differences from day to day. On any day one lender might be an 1/8^th of a point better, maybe even a ¼ point (when you account for costs and fees, anything more than this and they are hiding fees somewhere), just as one gas station might at times sell their gas for a few pennies less. But most lenders will offer mortgage rates in a very tight range. So mortgage rates are a commodity, but the mortgage experience is much more than just who has the best rates and fees on any particular day.

Having the best rate doesn’t matter if you don’t close on time or if you don’t close at all. Having the best rate quote isn’t going to help you if the terms of your loan change and you end up closing with a higher interest rate or higher fees. So what exactly should you be looking for when choosing a mortgage besides comparing the programs, rates and fees charged? There are a few things that will have a direct impact on how good, or bad, your mortgage experience turns out to be:

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Communication – Unless you’re a mushroom, you probably don’t want to be kept in the dark. You don’t realize how important communication is until you run up against someone who is not telling you what is going on. Does the loan officer return your phone calls and emails quickly? Does he fully answer your questions? Do you know the status of your loan and is there a system in place to show your loan status?

Knowledge and experience – Does your lender understand what your needs are and help you to meet your goals? Or does he just quote a rate? Does he know how to do the loan that you need? This is a real issue now with FHA loans. FHA used to be a big factor in the housing market, especially for first time home buyers loan But that dropped off and over the last 5 years FHA dwindled down to a trickle. The market has changed though, and this year FHA is the best option for many buyers. How experienced is the lender with FHA? Many loan officers have never done an FHA loan. Letting them practice on you is not going to give you a good mortgage experience.

Follow through – About 50% of good service is about doing what you said you were going to do when you said you were going to do it. If they are promising the moon but not coming through, that’s going to be a big problem.

Reliability – This is where the rubber meets the road. Is the lender going to be able to meet their obligations? More mortgage lenders, both brokers and national banks, have closed their doors over the last year than at any time in memory. Is your lender going to be around for the long run? Will they be able to meet the deadlines in the contract? Are they going to have the money at the closing when you need it? Surprises can be nice, but surprises that come at the closing usually aren’t the kind you want.

Reputation – What do you know about the lender, both the company and the loan officer? Do a little bit of research and see what other people’s experience has been. Do a Google search to see what you find, and see if the Better Business Bureau has any complaints filed. Ask your real estate attorney what they know of the company – they, along with title companies, have more experience with lenders and can tell you who is good and who to watch out for.

Everyone wants to get the best deal and mortgage rates might be a commodity, but the mortgage experience isn’t. When choosing a mortgage make sure you look at the big picture.

Read related post here : First Time Home Buyers Loan

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending July 4th, my take on the week’s financial news and how it affected Illinois mortgage rates.

First of all, happy 4^th of July to everyone. Independence Day is one of my favorite holidays. This is when summer really kicks in. I like the parades, festivals, barbeques and fireworks. And this holiday is all about freedom, something we take for granted but it is good to be reminded of what we have, and what we could lose if we don’t pay attention. That being said here is the breakdown of what happened to affect mortgage rates this week.

The key data this week was all about jobs. The ADP national employment report released Wednesday showed a loss of 79,000 jobs, many of them in the service sector which had been the one area that had been holding up the best. The jobs report yesterday showed the 6^th straight monthly decline with a loss of 60,000 jobs, right in line with expectations. It also showed a revision showing another 52,000 jobs lost over the previous 2 months. New claims for unemployment insurance moved up to 404,000 this week – the highest since the Katrina disaster. All these signs taken together show that the economy is muddling along at best. We may not officially be in a recession, but for most people it feels like one.

On the other side of the equation, oil prices moved up again closing at $146 per barrel. Gas prices at the pump here in Illinois (more specifically the Chicago area) are up past $4.00 per gallon. The news reports people are now driving less. It will take some time to see if the lower demand will be enough to drive prices lower. The European Bank hiked rates by a .25% on Friday to fight inflation, but the wording in their statement indicated this is probably going to be the only hike. German manufacturing was down sharply, so many analysts expect that the economy is slowing there, as it is here, and that on its own will bring inflation rates down.

The stock market finished its worst June since 1930. The Dow Jones decline has been just over 20%, the official mark of a Bear market. Losses from banks and big financial’s have led the way and the auto makers released awful sales reports this week and their stocks suffered. Even Starbucks, seemingly invincible, announced that they will be closing 600 of their lower producing stores. With these signs of the slowing economy, the sting of inflation is now looked at more as another factor crimping people’s spending than a reason we need to raise rates now. At least that’s the thinking for this week.

The mortgage bond market was holiday shortened and thinly traded this week. That doesn’t mean that the week wasn’t volatile. Mortgage bond prices moved up and down like a yo-yo this week as they tried without success to break through a key area of resistance. The week ended on a sour note with bonds worsening (rates moving higher) even as the jobs report showed softness. It is common for markets to sell off on long weekends as traders unwind positions beforehand.

Mortgage rates are just a little worse on the premium side than they were at the end of last week, but overall unchanged. We are still trading in a narrow pattern and mortgage rates are between 2 levels of resistance.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans 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 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    6.375%   6.589% APR

15 year fixed rate    5.875%   6.124% APR

5-1 A.R.M.               5.625%   5.788% APR      

7-1 A.R.M.               5.875%   5.989% APR

For Jumbo loans over $417,000

30 year fixed rate*   6.875%    6.997% APR – Requires 20% down payment

7-1 A.R.M.*              6.125%    6.327% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS – 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate    6.125%     7.048% APR

With no origination fee –        60 day lock

30 year fixed rate    6.375%     7.056%

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the 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. Thanks and have a great Holiday weekend.

Illinois Mortgage Rates and News