Welcome to Illinois Mortgage Rates and News week in review for the week ending November 28th, my take on the week’s financial news and how it affected Illinois mortgage rates.

I hope you all had a great Thanksgiving and have given some thought to what you are thankful for. In the mortgage market this week we have one more reason to be Thankful. Mortgage rates dropped this week, by a lot. Over the last month mortgage rates have been flat, and in a holding pattern. The news over the last few months has been consistently grim. The economy is slowing dramatically and the threat of inflation is just a hazy memory from this past Summer. Deflation is the watchword now. The Fed has taken short term rates all the way down to 1% in an effort to get banks to lend money. The government has been trying to get mortgage rates lower in order to jump start the economy, and all of these factors should have made a difference in brining mortgage rates down. But up until now, no luck.

It was a new Fed program announced on Tuesday that did the trick. With this new program the Fed will directly buy up to $600 billion in Fannie Mae and Freddie Mac and other mortgage backed securities, as well as another $200 billion in other consumer credit obligations. This is huge news, and something the Fed hasn’t done in the last 50 years. By moving into the market the Fed is sending a clear signal that they are going to stay in the market and do whatever is needed to keep rates down and get the market moving again. The markets reacted with a buying frenzy, and mortgage rates are about a half point lower now than they were at the end of last week.

If you are about to buy a home, this is great news. If you are thinking about refinancing your home, this could be great news, but it is not going to help everyone. Refinancing your mortgage is a great way to lower your payment and it can help those who need to restructure their debt and those who want to move from an ARM into a fixed rate loan. But many of the people who would get the most benefit from refinancing are those who bought in the last several years, when home prices were at their highest and mortgage underwriting was easier. One issue we are facing now is low appraisal values. Home prices have moved sharply lower, and the value may not be enough to support the mortgage. If you bought with a low down payment the mortgage may be higher than the current value of the home. I’ve seen other cases where the borrower bought the home with 20% or more for a down payment, but if they were to refinance now they would have to pay mortgage insurance. Another issue comes in with those who have a second mortgage or home equity line. When refinancing, the lender on the second mortgage needs to subordinate their mortgage to the new first mortgage, that is, they aren’t going to try and jump in line and take over the first position. This used to be almost automatic. Now it depends on the guidelines and position of the lender on the home equity loan. Still, there are a lot of people who will benefit from a refinance (no-closing cost refinance), and it makes sense to look into your options. If you have an FHA mortgage, you may have the easiest option with an FHA streamlined refinance. This mortgage offers no credit qualifying, often no appraisal and it can lower your payment by a lot. It is worth looking into.

If you are buying a home, the news is all good. With home prices down you get more home for the money, and with mortgage rates down your payment goes even further. If you are a first time home buyer (you haven’t owned a home in the last 3 years) you also can qualify for the first time home buyer tax credit, which means up to $7,500 off of your tax bill next year. As we come into the Holiday season, this is traditionally the slowest time of the year for real estate. If you are in the market and ready to buy, that means you have leverage and there are bargains to be had. The first step to buying a new home is to be pre-approved for a mortgage. Let me know if I can help.

One thing to watch out for if you are getting a mortgage at this time of year, especially a refinance, is how long your rate is locked in for. The sudden drop in rates means a big jump in volume for a mortgage industry that has been steadily downsizing. This means more pressure on appraisers, processors, underwriters and closers. Turn times will be longer, and with the holidays coming up, many people already have vacations planned and are working on short schedules in December. This makes a bigger impact on refinances because here in Illinois as in many areas of the country, you have a three day right of rescission ( a consumer protection giving you the right to back out of a deal after you have signed all the documentation). This means you will have to close your loan at least 3 business days before the lock expires. If someone is locking you in for 30 days or less, you will have to close before Christmas, and with the extra volume that may be a problem. I am locking all my refinances in for 45 days just for insurance and peace of mind. Purchases can be quicker, and we give priority to purchases.

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      5.375%      5.566% APR

15 Year fixed Rate     5.125%      5.288% APR

5-1 A.R.M.                 5.375%      5.537% APR

 

For Jumbo loans over $417,000

30 year fixed rate  * 6.50%      6.615% APR *

Special pricing requires 25% down payment or equity

7-1 A.R.M.                 5.875%       6.059% APR

 

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate      5.375%      6.047% APR

With no origination fee – 60 day lock

30 year fixed rate      5.75%      6.055% APR

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

 

These are just a few of the mortgage 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.

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