Welcome to Illinois Mortgage Rates and News week in review for the week ending August 29th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Because this is a holiday weekend, (and I’ve had some computer issues as well) this is a shortened version of the update. I’ll have the breakdown and analysis in the next few days. A lot of information came out including some data showing that the economy was stronger and inflation was higher than expected. Normally this news would have killed mortgage bonds and sent mortgage rates soaring. It didn’t this week because this was all seen as old info that doesn’t reflect what is happening now. Rates improved every day except for Friday when mortgage bonds tanked (the Friday before a long weekend effect). For the week mortgage rates are slightly better than last week.(here is a detailed look at Chicago mortgage refinance ).

Here is what Illinois Home 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 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 6.25% 6.347% APR

15 year fixed rate 5.75% 5.958% APR

5-1 A.R.M. 5.694% 5.763% APR

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

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 6.634% APR

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 6.125% 6.813% APR

With no origination fee – 60 day lock

30 year fixed rate 6.3750% 6.872% APR

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. Happy Labor Day, and have a great weekend.

Illinois Home Mortgage Rates and News

For most Chicago area home buyers, the cost of FHA financing is about to go up. For years FHA had a one price fits all policy. As long as you qualified for an FHA mortgage you would get the same terms, whether you had a large down payment or small, and no matter what your credit score was, the mortgage insurance was the same price for all. This policy changed a few months back when FHA adopted a risk based pricing model. Risk based pricing is the idea that those borrowers who are the best credit risks will pay the least, and borrowers who have a riskier credit profile will still be able to get financing, but they will have to pay a higher rate for their mortgage insurance. This short-lived policy is about to change again. As part of the recently passed Housing Bill, starting October 1^st, there will be a one year moratorium on FHA risk based pricing.

The details of this change have now been released, and instead of going back to the old rate schedule, FHA is increasing their mortgage insurance rates across the board. FHA breaks their mortgage insurance premiums into 2 parts. One, the up-front premium which is financed into the mortgage, and two, a monthly premium which is paid for at least the first 5 years of the loan. Here is the new schedule that will be in effect as of October 1^st.

Up-Front MIP –

1.75% – Purchases and Qualifying Refinances
1.5% – Streamlined Refinances
3.0% – FHA Secure (High Risk Delinquent Borrowers)

Monthly MIP – these premiums are divided by 12 and paid each month

0.55% – over 90% LTV
0.50% – less than or equal to 90% LTV

On 15 year loans with LTV > 90%, annual mortgage insurance will be .25%

On 15 year loans with LTV < 90%, annual mortgage insurance will not be required

What this means is that borrowers with the lowest credit scores and the higher loan to values (less down payment) will be getting a break once this policy starts. But those lower risk borrower’s who used to be conventional buyers, will pay a little more. Conventional loans are getting their own increases, so FHA still has an advantage, but the end result is financing is a little more expensive than it was before.

The new pricing goes into place on October 1^st. Some borrowers will save some money by financing (either through a purchase or a refinance) before then. We are a direct endorsement FHA banker, so we underwrite and fund the loans ourselves. If you need to close quick, we can do it.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 22nd, my take on the week’s financial news and how it affected Illinois mortgage rates.

This was another week in the mortgage bond market with huge volatility on a day to day basis, but an amazingly stable market when you squint your eyes and look just at the week end results. In other words, mortgage bonds went up and down like crazy , but mortgage interest rates ended the week just about where they started. This is the end of August doldrums, and there wasn’t a lot of market changing news released this week. Still, there were a couple of events that make me think that the market focus is starting to change.

The PPI (Producer Price Index) a measure of inflation, jumped 1.2% in July, the largest increase in 27 years.

Inflation hawk and Dallas Fed Chairman Richard Fisher warned in a speech that though the economy was slowing, the up-tick in inflation could lead to a “lingering inflationary fever”.

Over the last couple of months either of those items would have been enough to spark a huge sell-off in mortgage bonds. That didn’t happen this time. There was plenty of news showing the economy is still slowing, but the inflation fear would have trumped the other news. Mortgage bonds actually broke through and ended the week above a stubborn level of resistance. Some of the inflation is obviously seen through the rear view mirror, but in the past it hasn’t mattered. Bond traders have been wearing their inflation blinders and they would take any excuse to sell. The fact that the market took this news in without flinching makes me think we are likely to see better rates in the near future.

The big news this week (or really lack of news, but focus of rumors) was the condition of the big dogs in the mortgage arena, Fannie Mae and Freddie Mac. Their stocks sold off again this week as rumors of their impending demise continued. The Treasury has already announced that they will stand behind Fannie and Freddie, and a bail out has been worked into all the market equations. But knowing it is coming while not knowing when or how (or who wins and who loses) has kept the organizations in limbo. Fannie and Freddie are the biggest buyers of mortgage loans, so getting them out of limbo and in a position to buy will help stabilize the housing market. Letting it go on as it is now, with everyone knowing something is coming but waiting to see how it all pans out, makes for more fear and insecurity, which puts more pressure on Fannie and Freddie, keeping a negative loop going. I’m guessing that this will all come to a head soon, and the bailout will become official.

Here is what Illinois Home 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 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 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% 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* 6.875% 6.634% APR

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 6.25% 6.713% APR

With no origination fee – 60 day lock

30 year fixed rate 6.50% 6.852% APR

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 Home Mortgage Rates and News

When I first started in the mortgage business here in the Chicago area almost 2 decades ago, it was normal for a home purchase to close in 60 days. That is a long time, but it took that long to close because that’s how long it took to get a mortgage approved. The financing contingency date (the date in the contract that you need to have your mortgage approved by) was usually 45 days after the contract was accepted. Everything took longer back then from the appraisal to underwriting. If a file needed to close in 30 days that was a real rush, and we had to pull put all the stops to get it done. Like so much else, that way of doing business is long gone.

Now most contracts are written to close in 30 days or less. I’ve had two loans this month that closed in under two weeks (one where the buyers went on their honeymoon in-between), and have closed loans in days when necessary. Because of technology life is faster paced and people expect things to move faster. So one of the questions I get all the time is – How fast can you close? My answer is usually – How fast do you need to close? The truth is, in most cases we can close quickly. We underwrite and fund most of the loans ourselves, which means more control, and we now have FHA direct endorsement so we can close FHA files as fast as conventional ones. But there are still a lot of moving parts to getting a mortgage approved. In order to close a loan quickly everything has to be coordinated. The appraiser has to get the appraisal done quickly, the file has to be put together fast and accurately, and the documentation has to be collected up-front.

That’s where the borrower has control. If you need to close on a mortgage in a hurry, here are some things you can do to help yourself:

1. Get pre-approved ahead of time – once you have a contract with a fast approaching closing date, it’s too late to think of the things you should have done earlier. If you have a few problem spots on your credit, or other weak spots that need to be addressed, knowing what you need to do can put you in a much better position for a fast loan approval.
2. Have your documentation ready – The days of approving a loan based just on your credit score are gone. Having your documentation ready is a key to a fast approval. Having all the documentation at application means that we don’t have to try and get the paperwork in other ways, which slows the process down. Here are some of the things we will need for a normal file:

Current paystubs for the last 30 days for all borrowers.

W2s for the prior two years (2006 and 2007) for all borrowers.

Full tax returns for the last 2 years – only if you are self employed or have substantial commission income.

Bank and investment account statements for the last 2 months (enough to show where the down payment and closing costs are coming from as well as any required reserves) – all pages attached.

A copy of your driver’s license or other picture ID.

This is the minimum documentation. Depending upon your situation we may need more. To get a loan approved and closed quickly we will need to make sure we have what is required for the mortgage guidelines, and we need to address any questions that the underwriter may have. If you are looking for a fast closing, give me a call before you make an offer on a home and I can tell you what else you will need.

1. Have all your addresses and phone numbers – As part of the approval process we need to verify everything on your loan application. Addresses and phone numbers for both your current and past (if in the last 2 years) employers and if you are renting, your landlords.
2. Address any problems early – If you are buying with an FHA loan and you have had any late pays or credit problems in the last 2 years, we will need a letter explaining why it happened. If there are large deposits in any of your bank or asset accounts, we will need to know where the money came from and show a paper trail. Providing this information up-front saves time and helps speed the process.
3. Be prepared – The underwriter is the person who makes the final decision on the loan. If they issue an approval with conditions (things they need before the loan can close) be prepared to get the items needed as quickly as possible. Any thing that is listed as a pre-closing condition means the underwriter has to look at and sign off on these items before the property can go to closing.

You can close on a loan quickly, but you need to plan ahead. Working with your loan officer and having what you need takes away some of the stress and makes for a quicker, smoother closing.

Illinois Mortgage Rates and News

Contact your Illinois Mortgage Company Today!

The real estate market has had more than its share of bad news lately. Home prices are down, foreclosures are up and the outlook for the future is more of the same. From a big picture view the real estate market is miserable. But I’m seeing some signs here in the Chicago area that we may not have turned the corner, but we may be a lot closer than most people think. This isn’t a scientific account of what is going on, it is simply an anecdotal look at what I’m seeing in the market right now. I’m not sure what exactly is causing this, maybe it’s a result of the new housing bill, or maybe it’s just the realization from home buyers that there are bargains to be had, but the real estate market here in the Chicago area is active. Here are some “trends” I have noticed:

1. Properties are selling – August is normally one of the slowest months for selling real estate here in the Chicago area. This is the month when people are taking their last minute vacations, getting their kids ready for the new school year, or just enjoying the end of the summer. Most years home buyers take the month of August off. It’s no fun spending the day climbing in and out of a Realtor’s car when the weather is so hot. But that’s not the case this year. Buyers are writing contracts, and a lot of these contracts are coming together. I know because my phone is ringing and I’m busy putting together loan packages at a time when I expected to be able to put my feet up on the desk and take it a little slower.
2. Realtors and home sellers are pricing homes to sell – Any time that the market changes, it takes people a while to recognize it. This is especially true for the real estate market where the changes happen slower and are invisible for all but the most attentive consumers. The market a few years back was white hot. Most home owners didn’t buy a home during that time, but they saw the high prices homes in their neighborhoods fetched, or maybe refinanced their mortgage with a value higher than they expected. It is those prices they have in mind when they go to sell. Or it has been until lately. Realtors are now pushing harder for realistic (lower) listing prices, and home owner’s who want to sell rather than just have a sign in the yard for the next 6 months, are listening to them. So listing prices have come down by a lot.
3. Home buyers are getting realistic, too – There is no question that this is a buyer’s market, but for too many potential home buyers that meant offering a ridiculously low price and then being surprised when no one bit. It is a buyer’s market, and this means home buyers are getting good prices, and often seller concessions (money from the seller to pay for closing costs, for example), but this doesn’t mean that home sellers are giving the house away. I’ve seen quite a few buyer’s who wasted months trying to buy short sales or foreclosures where the lender never even responded, who ended up buying homes that fit their needs and were good deals, maybe even bargains, though not outright steals.
4. Home buyers and consumers are adjusting to the new lending rules – There is no question that it is harder to get a mortgage now than it was a year ago. The tighter financing rules have taken some potential home buyers out of the home buying pool. But financing is available, and there are options for many if not all potential buyers. This was a shock when lending guidelines first started to tighten, now it’s the new normal.
5. Realtors are worried about appraisals – Over the last week I have had 3 conversations with Realtors who were concerned that the offer they were getting on their listing was too high and that they were worried that the property wouldn’t appraise out. This is not the way Realtors normally think. Realtors want to get the highest possible price for their listings, and figure that the details will all work out on their own. To me this says two things: one, that the market is stronger now if offers are coming in high, and two, Realtors are now not only realistic about the market but have a healthy dose of fear, too.

These are again just observations, not hard data, but I think the truth is more complicated than the bleak headlines show. Real estate is different from market to market, and the headlines lump the stronger areas in with the areas with the biggest declines. The market here in the Chicago area is not booming, but it was never as hot as the bubble markets like California, Nevada and Florida, so it makes sense that it would never go down at the same rate.

What we are seeing is a balancing out of pent up buyer demand and sellers who are motivated to sell. The market over all is slow, but some homes are selling quickly. I’m told that about a third of the homes listed are sold quickly, many within the first month. These are the homes that show well and are priced right. Other homes are selling later, usually after price cuts to bring the listing price down closer to the current market. And some homes, because of both condition and price, are going to be on the market for a long time before they sell, if they do at all.

Over the next months we will see if this is a boomlet or a long term trend, but right now the market is active.

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 15th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Over the last several weeks, mortgage rates have been going in a pattern, two steps forward – two steps back. Some weeks it is three steps forward and two steps back and other weeks it is exactly the reverse. In other words mortgage rates have been volatile with big daily moves either up or down, but over all they are in a tight pattern with mortgage rates hardly changing at all from week to week. We may be about to see a change as mortgage rates improve and break out of this dance. Then again, this could be a head fake to the outside before we return back to the range.

As has been the case over the last several months, there was a lot of contradictory information released this week. Early in the week the CPI (Consumer Price Index) came in with a red hot reading showing inflation at a 17 year high. The number was higher than expected, but it was expected to be high as a result of the high oil and commodity prices we’ve seen over the last months. This reading would have normally killed the mortgage bond market, but with oil prices coming down this was seen as a look in the rear view mirror and largely discounted. A couple of regional manufacturing indexes also came in with better than expected results. On the other side, the retail sales report looked weak, and even weaker when you factor inflation into that number. Unemployment numbers jumped to near 450,000, much worse than the 375,000 average we’ve seen over the first half of the year. The Michigan Consumer Confidence index also came in shaky at 61.7% just below the anticipated 62%, but the bigger news was that consumers are not as pessimistic about inflation in the future as they have been. Economists and market prognosticators are starting to think the same thing. Gary Stern, the Fed President of the Minneapolis region, announced in a speech that he expects higher unemployment and lower inflation as we go forward, another Fed member had the same sentiments earlier this week – a sharp change from what we’ve been hearing from other Fed governors recently, and another suggestion that the Fed won’t be raising rates any time soon.

The market is now starting to think that inflation may not be the biggest problem our economy faces after all. Why the switch? A couple of reasons. First, oil prices are coming down steadily. The price of a barrel of oil was as low as $111 on Friday and closed at $113. This is a big drop from the high of $147 a few weeks back, and even more amazing that it happened at the same time as an invasion by Russia into Georgia, an oil producing nation. The dollar is also strengthening steadily. As the dollar increases compared to other currencies, this should mean higher exports and lower mortgage rates. Maybe a bigger factor is that the rest of the world is starting to slow down along with the US. It used to be that the United States led the way economically for the rest of the world. Many economists recently have signed on to the theory that this is no longer the case, that with the rise of China and the European Union as economic powerhouses the rest of the world has decoupled from the U.S. and will continue to grow as we dip. It turns out that that is not the case. The economic downturn we have been seeing is now spreading world wide. Another suggestion that rates should be going down.

Then again, even as the macro outlook points to lower mortgage rates, consumers aren’t going to get the full benefit. Last week both Fannie Mae and Freddie Mac announced another round of extra fees and increased risk based pricing.

Mortgage rates improved this week and mortgage bonds moved above a level of technical resistance. There is another resistance level just above where mortgage bonds are now, but if bonds can move past that there is a lot of room for mortgage rates to drop. 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 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 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% 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* 6.875% 6.634% APR

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 6.25% 6.713% APR

With no origination fee – 60 day lock

30 year fixed rate 6.625% 6.962% APR

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.

It’s been my goal here at Illinois Mortgage Rates and News to keep you informed about what’s happening in the real estate and mortgage markets, especially here in the Chicago area and throughout Illinois. In addition to this blog, I’m now also contributing to a group blog, Lenderama, the mortgage Industry blog. This blog is more of an insider account of topics of interest to those of us in the mortgage industry, and I’m excited to be part of a very impressive line up. It has been one of the blogs I had to read every day, and I look forward to adding to the conversation.

If you are in the mortgage or real estate industry and Lenderama isn’t already on your must-read list, stop by and visit.

Illinois Mortgage Rates and News

Update 02-14-2009

As part of the new stimulus bill,  the First Time Home Buyer Credit was altered and the credit raised from $7,500 to $8,000 (This is 10% of the purchase price up to a maximum of $8,000). As originally written, this credit would be taken in the first year but have to be paid back over the next 15 years, so it was more of a no interest loan than a true credit. That has been changed and it is now a full credit as long as you stay in the home for at least 3 years. The credit is good for any first time buyer who buys between January 1^st and December 1^st of this year and is available for singles with income up to $75,000 per year, and married couples with income up to $150,000.

One of the biggest provisions of the recently signed housing bill is a first time home buyer tax credit of up to $7,500. This credit is available for anyone who has not owned a home in the last three years and is designed to jump start the housing market and give first time home buyers a reason to get off the fence and in to the game. A lot of real estate companies have been pushing this credit as a no-brainer – free money from the government. I think there are some great benefits to this credit, but I have some mixed feelings on it – or at least the way it is being promoted. This is really an interest free loan, not a true credit, and it will need to be paid back over time. Still, an interest free loan is a heck of a good deal if you treat it as a loan. You just need to understand how it works and what it will mean for you not only now, but in your future planning.

First of all, you need to know how exactly the credit works.

It is available for first time home buyers only – this includes anyone who hasn’t owned a home in the last 3 years.

The credit is for 10% of the purchase price for a maximum benefit of $7,500 – If you buy a home for $75,000 or above the credit is $7,500.

The credit is only available for homes purchased between April 9, 2008 and July 1, 2009 – this applies retroactively.

The credit is capped out based on income. Single taxpayers are eligible up to $75,000 income and married couples with incomes up to $150,000 will receive the full credit.

The credit needs to be paid back over the next 15 years at the rate of $500 per year (for the maximum credit).

Those are the basics, here are the details. You will still need a down payment when you buy. The credit doesn’t kick in until after you file your taxes the next year. The tax credit is applied to your overall tax bill. So if you put together your tax return and you would normally owe $6,000, you will get a refund of $1,500 back. If you would normally receive a refund of $1,500, with the tax credit added back in you now would get $9,000 back. This money is yours to do what ever you want with it. But again, there is a catch. This isn’t a real credit, it’s an interest free loan.

Starting the following year you will need to pay back the credit over the next 15 years. If you received the full $7,500 this means you will have $500 more on your tax liability for the next 15 years until the loan is

Tips :illinois Fha Loans Guideline

paid in full. A dollar today is worth more than a dollar next year, so this is still a great deal. Here is where I see the problem, though. Most first time home buyers don’t stay in their first homes for 15 years. Five years is much more likely. So if you bought the home and sold it 5 years later you would have paid back $2,000 of the credit (you skip the first year). That means you still owe $5,500 to the IRS, though the loan will be forgiven if you sell without making a profit.

It makes sense to take the credit. Free money, even if you have to pay it back, is hard to pass up. But make sure you consider this when it’s time to sell. If the credit means you will walk away with less cash to put down on your new home, that’s a problem you need to address. If it means that you use your sale proceeds as a down payment and then have a major tax liability when you file your taxes the next year, that’s a bigger problem. Even more so if you don’t have other savings to pay the tax bill.

This credit is a great opportunity, but make sure you understand the implications. Tips

:illinois Fha Loans Guideline

Naperville Homes for Sale

Illinois Mortgage Rates and News

If you are buying a home in Chicago or the Chicago area, an FHA mortgage might be your best financing choice. With FHA there are two ways to get your mortgage approved. The first is through an automated approval. This is the way nearly all conventional loans are approved, and most FHA loans are approved this way, too. When you apply for a mortgage approval or pre-approval your loan officer enters all your personal and financial information into a computer program and uses an Automated Underwriting System (AUS) to determine the risk in the loan. The system issues either an approval or a refer to the underwriter decision. This is a very simplified explanation. Part of getting the approve decision is based on how your loan officer interprets your loan information and how it corresponds to FHA guidelines. If the wrong information is put in, or if the information is right but not acceptable according to the guidelines, you may get an automated approval, but when the underwriter goes over the details she may overrule the approval and deny the loan. So it is important that your loan officer understands all the ins and outs of FHA financing. But if the loan is put together correctly and the right information put in, an automated approval is the quickest and easiest way to get an FHA Loan approved.

illinois fha loans

But what happens if the loan doesn’t get the automated approval decision? Sometimes there are borrowers who don’t quite fit the box for the automated approval, but have reasons why they should be able to own a home and pay a mortgage. The AUS measures risk, but it isn’t a live person, and sometimes a loan that looks too risky based on the computerized decision is a safe loan when all the facts are presented. The loan could seem too risky for a number of reasons: maybe because of recent credit problems, maybe it appears there isn’t enough income to handle your debt, or it could be an employment issue. My job is to find the strengths in the borrower and present their file in the best light. If there is a problem in the file, I need to understand what happened and why it happened. Maybe the credit looks bruised and the credit scores are low, but there was a reason for the late payments which make them isolated and unlikely to happen again. Explaining the special circumstances can lessen the risk and show the underwriter why the loan should be approved.

One of the common reasons that loans are close calls is when the ratios are too high. Ratios, the percentage of your income which goes toward your mortgage payment and the percentage of your income which takes up the mortgage payment plus all your other debt are set at 31% and 43% respectively, but you can go higher than those percentages with the automated approval. If you don’t get the automated approval and you need to go beyond these stated ratios, you will need compensating factors to show that you are not taking too much risk. Here are some of the things looked at as compensating factors. The more of these that your loan has, the stronger your case for an approval is:

illinois fha loans

• The borrower has substantial documented cash reserves after closing. (At least 3 months’ worth).

• The borrower has demonstrated the ability to accumulate savings.

• The borrower makes a large down payment (10% or more.).

• The borrower has demonstrated a “conservative” use of credit.

• The borrower has demonstrated the ability to pay housing expenses equal to or

greater than the proposed monthly housing expense for the new mortgage over

the past 12 months.

• Previous credit history shows that the borrower has the ability to devote a

greater portion of income to housing expenses.

• The borrower receives documented compensation or income not reflected in

effective income, but directly affecting the ability to pay the mortgage (this could be a 2^nd job that we can’t count as full income or even public assistance).

• There is only a minimal increase in the borrower’s housing expense.

• The borrower has substantial non-taxable income.

• The borrower has potential for increased earnings, as indicated by job training or

education in the borrower’s profession.

• The home is being purchased as the result of relocation of the primary wage earner

and the secondary wage-earner has an established history of

employment, is expected to return to work, and there is reasonable prospects for

securing employment in a similar occupation in the new area.

There are other issues like having been on the job or your current residence for a long time which add to your stability and make your case stronger, but aren’t really compensating factors. If your case is a close call, the way that your case is presented can mean the difference between loan approval and a denial. If you are considering an FHA loan in Chicago or the Chicago area, give me a call, I’d love to help.

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 1st, my take on the week’s financial news and how it affected Illinois mortgage rates.

Allow me to take a moment away from the weekly mortgage rate update to mark an anniversary, of sorts. No, there are no holidays, no president’s or celebrity birthdays that I know of, and if it is your wedding anniversary, congratulations, but that’s not what I’m talking about either. Give up? This week marks the 1^st anniversary of the mortgage crisis and the resulting credit crunch. Celebrating probably isn’t on the agenda, but it is worth a look back to see what happened and how much has changed over the last year.

I mark this as the anniversary of the start of the mortgage mess because it was just a year ago that American Home Mortgage (AHM), the 10^th largest mortgage lender in the country at the time announced they were shutting down operations and going bankrupt. There were a few small sub-prime outfits that had gone bust before this, but American Home’s demise was so sudden and so unexpected it caused an earthquake in the mortgage industry and set off a chain reaction which sped through the mortgage industry, Wall Street and our whole economy.

AHM wasn’t involved in sup-prime mortgages, but they did do a lot of stated income and no verification loans for borrowers with good credit. These loans had been one the hottest products in the mortgage market and because the interest rates were higher than the normal conventional loans, Wall Street couldn’t get enough of these loans to fill up its pipeline. But house prices had started to slide and loan default rates were edging higher. Suddenly their appetite for these riskier mortgages dried up and they stopped buying the loans from wholesalers like AHM entirely. Like a game of hot potato, you don’t want to be the one holding the spud when the music stops. AHM had a whole portfolio of unsalable loans which they had leveraged to the hilt. On Friday it was business as usual, on Monday they were effectively out of business.

After that it seemed like a new lender bit the dust nearly every week. Wall Street had their casualties, too and soon it wasn’t just sub-prime mortgages that were toxic, but all mortgages. Now a year later, mortgage underwriting is much tighter, home prices are much lower, and the mortgage crisis is still a fixture on the front page news. A year ago I don’t think anyone would have predicted that the sub-prime mess would lead to a bailout/rescue of Fannie Mae and Freddie Mac. But now, a year into it, how far are we from the end? I think we are through the worst of it, but we will be dealing with the repercussions for a quite a while. Mortgage guidelines were too loose for a while and now they are tighter than they should be. But if you are looking to buy a new home you can buy it a lot cheaper than you could just a year ago. With home prices coming down more buyers will come into the market and eventually lenders will start looking at the opportunities not just the risks.

The biggest mover of mortgage rates each month is the jobs report. The unemployment rate released today rose to the highest level in more than four years. Payrolls fell by 51,000, less than the 65,000 forecast, but enough to drive the unemployment rate up to 5.7%. Earlier in the week consumer sentiment came in at a low51.9 reading, but that was better than what was expected. The Institute for Supply Management’s factory index fell to 50, again, slightly higher than projected and right at the dividing line between expansion and contraction. The upshot is that the economy is struggling and will probably get worse, but it isn’t plunging lower. This also means the Fed is unlikely to raise short term rates any time soon.

Mortgage rates improved most of the week and we are now at the best rate in the last month. 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% 6.524% APR

15 year fixed rate 5.875% 6.014% 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 6.375% 7.169% APR

With no origination fee – 60 day lock

30 year fixed rate 6.625% 7.135%

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 You, Contact your illinois Mortgage Company Today !

Illinois Mortgage Rates and News