2008 is finally at an end, and as the economy totters forward, we can say we survived a tumultuous year. That is an understatement. In my year end review of last year, I said that 2007 was the year it all hit the fan. In hindsight, the fan was just starting to spin last year. It was this year that the bad decisions of the last several years splattered all over the economy, affecting us all. This year was the year that prices of oil and other commodities skyrocketed to all time highs as the markets worried over the impact of runaway inflation, before crashing to historic lows as deflation became the watch word. This was the year that the stock market hit the skids at the same time that house values deteriorated throughout the country. This was the year that some of the mightiest banks and brokerage companies bit the dust or needed Government bailouts to survive. Credit default swaps became part of the national conversation and Ben Bernanke and Hank Paulson became central figures on the nightly news, instead of trivia questions for economics students. This was a year of fear, and uncertainty.

Here is a timeline to some of the highlights (low lights) of the year:

January –

• Bank of America, with low cost government financing, bought out the country’s largest mortgage banker, Countrywide as the company was near imploding.
• As overseas market started to tank based on bad news in the US economy, the Fed announced a surprise cut of ¾% in the Fed discount rate.
• The Bush administration proposed a $150 billion dollar stimulus plan (which seemed huge at the time) which would send out checks to all tax payers.
• Increases in conventional and FHA loan limits were proposed.
• The Fed cut rates again, this time by .25%, for a cut of 1.25% in one week. Is there panic in the air?

February –

• The markets worry about the effects of rate cuts on inflation, and mortgage rates move higher.
• Project Lifeline is announced, the first of several plans to help homeowners behind on their mortgage.
• FHA lending limits increased, making it available to more home owners and home buyers. As conventional guidelines continued to tighten, FHA took more and more of the market share.

March –

• There is panic in the mortgage backed securities market due when 2 lenders, Carlyle Capital and Thornburg Mortgage, are forced to liquidate mortgages to raise funds. This is a small taste of what is to come.
• The Fed cuts rates by another .75%
• Mortgage rates continue to move higher.
• The Fed stepped in to engineer an emergency bailout of Wall Street giant Bear Stearns which was choking from its exposure to bad mortgage debt. With Fed help, JP Morgan Chase bought them out for a price of $2 per share. They were at $68 a share just a week earlier.

April –

• Gas prices are rising and the markets are more and more worried about inflation.
• The Fed cuts again, this time by .25%, bringing the discount rate down to 2.00% – for what looks like this is the end and the Fed is done cutting.

May –

• Conventional underwriting tightened again, and FHA moved toward risk based pricing.
• Fannie Mae drops its declining markets policy, which should be a big boost for real estate, but the PMI companies keep it in place.
• Oil prices hit an all time high of $135 per barrel. With gas prices over $4 per gallon inflation is the big worry.
• The Illinois Anti Predatory Lending law takes place, but all the loans it is supposed to regulate have already been eliminated due to market conditions.

June –

• Mortgage rates hit the highest point in over a year as inflation fears near their peak.
• Lenders write off more losses on their loan portfolios.
• The stock market, which had been volatile all year, starts diving lower.
• Oil prices hit their peak at $147 per barrel.

July –

• Indy Mac bank collapses, making it the 3^rd biggest bank collapse on record.
• The Treasury steps in with an extension of credit for mortgage giants Fannie Mae and Freddie Mac in the hope that it won’t need to do a full scale bailout.
• The oil bubble pops and oil prices start to fall.
• A new housing bill is passed, giving more credit to Fannie and Freddie, a $7,500 tax credit for first time home buyers and eliminating the FHA down payment assistance programs, one of the last ways to buy a home with no down payment.

August –

• This was the calm before the storm. The economy is slowing but inflation levels are still high.
• Lots of rumors and uncertainty on the economy.

September –

• Fannie Mae and Freddie Mac are bailed out and taken into a government conservancy.
• Mortgage rates drop close to their yearly lows.
• A big bomb goes off on Wall street when Lehman Brothers is allowed to fail, Chase buys Merrill Lynch and insurance giant AIG gets a government bailout.
• The repercussions from the Lehman collapse is the start of a true credit crunch, and banks are now afraid to lend to each other, or anyone else.
• The Fed, along with other national banks, steps in with $250 billion line of credit for the major banks.
• The Fed and Treasury come up with the Tarp plan to use $750 billion of government money to buy back the toxic mortgages that are at the heart of the economic problems, re-capitalizing the banks and getting them to lend again.

October –

• The stock market is diving again.
• Volatility centers around the Tarp plan, and whether it will make it through congress. The bill goes from a 3 page out line to over 400 pages before getting passed.
• The TARP plan passes, but there is no real change in conditions.
• De-leveraging is the theme, as big investors sell everything to raise cash.
• Oil drops below $70 a barrel.
• The Fed lowers the Fed Funds rate down to 1%.

November –

• Libor and other short term interest rates move lower as some signs of the credit crunch start to ease.
• Job losses accelerate.
• The Big 3 auto makers hit the skids, and talk of a needed bailout.
• The Fed announces a plan to buy up to $600 billion in mortgage backed securities, and mortgage rates drop.

December –

• It’s officially announced that we’ve been in a recession for a full year.
• The Fed drops mortgage rates to a range of 0 to .25% – effectively 0.
• The Fed also commits to buying more bundled assets like student loans and car loans, trying to bring more liquidity to stalled out markets.
• The GM and Chrysler get their bailout, but big strings are attached and we know they will be back for more soon.
• Oil close the year at just over $40 per barrel, less than a third of its high over the summer.
• Mortgage rates fall further, and refinances boom.

I think we should all give ourselves a little pat on the back for surviving this year. There are still huge problems with the economy and with the real estate market, but there are signs to be optimistic, too. We will see what happens in the coming months and over the course of the year, but for now enjoy the New Year and my hope is that this will be a much more prosperous and less stressful one for one for all of us.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

With rates near an all time low, refinancing has become a big thing again. Now, when times are tight, lowering your interest rate and your payment can make a real difference in your family’s budget. Rates are great, but one of the big problems in this market is that a lot of people who could get the most benefit from refinancing their mortgage, won’t be able to. With the slow real estate market property values are down, which means more homes aren’t appraising high enough to qualify for the new loan. Credit standards are more restrictive and you will need to verify all your income and assets. But if you already have an FHA mortgage, none of these factors matter. FHA has one of the easiest and best programs for refinancing your mortgage, the streamlined refinance.

The FHA streamlined refinance is only available for borrowers who currently have an FHA mortgage (if you don’t, you can still refinance into an FHA mortgage, but it will be a fully documented mortgage). Because FHA is a government program, and its mission is to increase home ownership, they have designed this program as a way to make it easier for borrowers who are already paying their mortgage on time to lower their payments without going through the entire qualifying process.

There are two types of FHA streamlined refinance, one where you can add in all your closing costs and pre-paids, but it requires a new appraisal to show you have enough equity to support the new loan amount. The other is an FHA streamlined refinance with no appraisal. This program does not require a new appraisal (which makes a difference if your property value has gone down). You can still add closing costs and escrows into the new mortgage amount, but your new mortgage is capped at the amount of your initial loan.

Here are some of the features of the FHA streamline refinance:

• No credit qualifying. This is not credit score based and it is not even necessary to pull a full credit report. Your mortgage does need to be up to date, and current and we will look at your payment history over the last 12 months.
• No income qualifying. When we take a streamlined application, we don’t even look at your employment, income or debts. The logic behind this is that if you are able to handle your mortgage payments and other debt now, you will not have any trouble when the payment is lowered.
• The mortgage needs to be an FHA loan, and it has to already be insured by FHA (If the lender who made the loan hasn’t gotten the loan insured yet, you will have to wait until it is in their system).
• You can’t receive any cash at the closing.
• In order for the loan to be approved, you will need to show that this loan is helping your situation. This means a reduction in your payment by at least $50 per month.
• The actual closing costs on these loans are low, the FHA commitment fee and title charges are the only costs needed. With most of the streamlines I have done, we have paid these costs through the premium we receive from the lender, so the borrower isn’t paying it directly.
• With FHA there is always an up-front mortgage insurance fee that needs to be paid. Depending on when you bought the home, you may get a refund of a portion of the fee you paid initially. This works on a sliding scale. You will get a large portion of the fee back in the first year, but it is all gone by the end of the third year. If you get a refund it will be applied against the new fee, with the balance financed into the new loan amount.
• One other thing to keep in mind is that you want to close your loan as near the end of the month as possible. FHA, unlike conventional mortgages, charges interest on their payoffs on a monthly basis, not per day. So you will pay the same amount of interest if you close on the first day as you would on the last day. You still have to allow for the 3 day right of rescission, and in a market like this getting a title spot and closing within your lock term is more important.

FHA used to be a major loan option, but it all but disappeared for a number of years as all sorts of low down payment plans came out on the conventional side. With conventional loans tightening, FHA made a resurgence last year. This means that older loans will likely be eligible for streamlines with the appraisal, but most of the newer loans will be doing the loan without the appraisal. Even if there are no closing costs involved, when you close on a loan you will need to set up a new escrow account and pay interest to the end of the month. Some of this will be able to be added in to the new loan amount, but without an appraisal you are capped at the original loan amount. Keep in mind that you will skip your next month’s payment and get the money in your escrow account back from your current lender in the next several weeks after closing, so it will be a wash in the long run, but if you bought with the minimum down payment you will probably need some cash at closing.

The FHA streamlined refinance is a great deal for most borrowers, and a quick and easy way to take advantage of the low rates we can now offer.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

Welcome to Illinois Mortgage Rates and News week in review for the week ending December 26th, my take on the week’s financial news and how it affected Illinois mortgage rates.

I hope everyone is having a great holiday season. This has been a short week for many people, including the traders on the mortgage backed securities markets. With a thinly traded market, and wholesale lenders filled to capacity with loans, mortgage rates ticked slightly higher this week. Still, we are near the best rates in the last several years. There will be a lot of people who benefit from the low rates we are seeing now, even if the rates don’t move any lower. With rates this low, this could be one of the biggest refi booms ever, but there are some changes this time which make this very different from previous refinance waves.

1. Not all borrowers will qualify – In previous refinance booms nearly everyone who owned a home and had decent credit would benefit from a refinance. This time it is going to be more selective.

• Your credit will need to be excellent in order to qualify for a conventional loan.
• You will need to be able to prove your income and qualify for the payment.
• And probably the biggest consideration now is that the property will need to appraise out high enough to support the new mortgage.

(These restrictions don’t apply for borrowers who have FHA loans and want to take advantage of the FHA streamlined refinance, which doesn’t verify or state income, is not based on your credit score and may not require an appraisal. The main requirements for this loan are that you are up to date on the payment of your FHA mortgage and that you will benefit with a lower payment.)

2. Not all loans will benefit –If you currently own a home financed by a Jumbo mortgage (over $417,000 for a single family home), you are probably wondering what all the fuss is about. Conventional mortgage rates were in the mid sixes a few months back and are in the low fives now. In this same time period, Jumbo loans have hardly moved. The difference is that the Fed has made a commitment to buy mortgage backed securities backed by conventional mortgages (which are also now backed by the federal government). Jumbo loans are backed only by the bank which issues the mortgage and investor interest in these loans is slight, so there is a huge spread between the going rate for conventional loans and Jumbos. Some people are paying down their jumbo loans in order to get under the conventional threshold. With low returns in most investments, this may be a good way to get a guaranteed return.

3. No cost refinances are getting harder to do – No-closing cost refinances have been a great benefit to consumers and one of the most popular ways to refinance a mortgage. Lenders have traditionally offered a variety of pricing options for their mortgages. We, as mortgage brokers and mortgage bankers, get rate sheets from the lender with price matrixes that offer a variety of ways to price the loan. The wholesale lenders pay us for bringing them loans, so we can price it to the consumer in three ways  –

• You can pay the normal title and closing costs and get a mortgage at the market rate with no points.
• You can pay points (1% of the loan amount for each point) to buy down the rate. The more you pay up-front, the lower your rate will be. … Or..
• You can go the other way and with a slightly higher rate, take on a loan with no closing costs at all.

With the no-cost refinance your mortgage broker or banker is using extra premium from the lender to pay for all the closing costs. If you have a larger mortgage, a no cost loan was usually just slightly higher than a loan with full closing costs. This was a great deal for home owners as they could lower their rate and payment with little up-front cost, and refinance again if rates dipped lower down the road. It was also a great deal for mortgage brokers and mortgage bankers who would refinance the same clients several times in the course of a year if rates continued to fall. It wasn’t nearly as good a deal for the wholesale lenders who paid extra money for a loan that quickly disappeared from their servicing portfolio. It looks like lenders are going to be more cautious this time. The spread between higher rates and the lowest rate loans has narrowed, and in some cases disappeared. No-cost refinances are still possible with the largest conventional loans, but many borrowers will need to expect to pay closing costs to get their loan. If mortgage rates drop again, they will need to pay the closing costs again, making it prohibitive to refinance unless the payment is much lower.  

Because of these factors, refinancing will be different this time. But if you do qualify, it can mean a huge difference in your payments and a real stimulus to your wallet.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), 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      5.25%      5.356% APR

15 Year fixed Rate     4.875%    5.046% APR

5-1 A.R.M.                 5.125%    5.322% APR

For Jumbo loans over $417,000

30 year fixed rate  * 6.75%      6.827% APR *

Special pricing requires 20% down payment or equity –

7-1 A.R.M.                 5.375%       5.598% APR

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate      5.00%      5.784% APR

With no origination fee – 60 day lock

30 year fixed rate      5.50%      5.739% 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.

This coming week will also be a short week, so expect more volatility in mortgage rates.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

Welcome to Illinois Mortgage Rates and News week in review for the week ending December 19th, my take on the week’s financial news and how it affected Illinois mortgage rates.

The Fed added some more stimulus to the economy this week by lowering the Fed Funds rate to an all time low range of 0 to .25%. This is the rate the big banks get when they borrow money from the Fed. Most people expected that they would cut rates to a half point, leaving some powder dry for another cut later. Instead, they cut to the bone in order to break the credit log jam. The Fed also announced that they will step up their purchases of mortgage backed securities and other bundled loans including car loans and student loans. The idea here is that the big banks, getting money for free and having a market to sell their loans in, will now be anxious to lend it out and make a nice tidy profit on the spread. But with the economy still slipping, this might not be enough incentive for them to take the risk of lending it out, at least not on the best terms. The activity in the mortgage market bears this out.

After the Fed announced the rate cut and buy back plan, the mortgage bond market surged 130 basis points higher, an amazing rally. Wednesday morning, mortgage rates dropped to a 40 year low, hitting 4.75% – for about an hour. At rates this low, just about anyone who has a mortgage and can qualify would benefit from lowering their rate. The rush was on to lock in these rates, and lender’s websites were unequipped to handle the volume. It was a frustrating morning as one website after another crashed. Think of the Woodstock rock concert. You have an area where the roads are all working quite nicely with the normal flow of traffic, but when an extra million or so people want to get there, all at the same time, it’s not going to work. The very first people on the road will be fine, but everyone else is stuck in a big mess. So it was with mortgage locks Wednesday. The lenders quickly figured out that demand was exceeding supply, and the best rates were soon gone. Think of the 4.75% rate that everyone is talking about as a door buster special at Walmart. It was there, but only a lucky few were able to take advantage of it. So even as the big lenders are borrowing short term money for free (or close to it), they are at capacity and lending it out at a higher spread.

Over the last few days the mortgage bond market slipped back as traders took profits from the big runoff. So as word filtered out that rates were at an all time low, the rates that were available had already ticked up. Still great, but not as phenomenal as before. This could still be the mother of all refi booms, but it isn’t going to happen all at once. Mortgage bonds, which mortgage rates are based on, have been extremely volatile and I expect that will continue. But I also expect that we will have opportunities where the rates dip down, and the key will be to be ready to lock in when the rates do dip. This means preparing for your refinance, getting your documentation to your loan officer beforehand, so when the rates are available you can take advantage of them.

To get the most out of your refinance, you should also look at the process realistically. In past refinance booms it is almost a bragging right to be able to say that you locked into the lowest rate. The reality is the very lowest rates are usually only there for a short period, and not everyone can take advantage of them. If the refinance will lower your payment, improve your financial situation and is cost effective, it is worth doing. You might be better served going for the good rate rather than holding out for the very best rate. Also, when you are shopping for a mortgage, don’t just concentrate on the rate, look at the over all costs, too. Every time the rates dip there are people and companies who quote outrageously low rates, but extra points and closing costs to get you there. With the extra fees it takes longer to pay back the upfront costs with the savings from the lower payment. Most borrowers will be better served with a lo cost or no-closing cost refinance (at a slightly higher rate than you could get if you paid the closing costs yourself). If you are in an FHA mortgage, you can do an FHA streamlined appraisal with no credit qualifying and often no appraisal needed.

Even though rates dipped to the best level in the last 40 years, we ended the week just about where we started. Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), 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      5.00%      5.176% APR

15 Year fixed Rate     5.00%     5.159% APR

5-1 A.R.M.                 5.00%      5.237% APR

For Jumbo loans over $417,000

30 year fixed rate  * 6.625%      6.725% APR *

Special pricing requires 20% down payment or equity –

7-1 A.R.M.                 5.375%       5.598% APR

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate      5.25%      6.034% APR

With no origination fee – 60 day lock

30 year fixed rate      5.50%      6.147% 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.

With Christmas next week, the mortgage bond market will be thinly traded which can exaggerate price swings. This means rates may improve or get worse more than they would in a normal week. If there is anything I can do to help, let me know.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

The Fed gave consumers an early Christmas present at their meeting yesterday. In an unprecedented move, they dropped short term rates down to a range of 0 to.25%. The Fed was expected to cut rates by a half a point, leaving some ammunition for future action. Instead, they went bold and cut the rates effectively to zero. This was a surprise, and an indication of how soft our economy is. But the real gift to consumers was the statement that went along with the rate cut. The Fed had already started a program of buying back mortgage backed securities and other long term obligations. In their statement yesterday they announced that they were going to expand that program and buy back more mortgage bonds, and do “whatever is necessary” to get the economy moving again.

Both the stock and mortgage backed securities markets rallied on the news, and mortgage interest rates dropped and are at their lowest level in decades.

So how will this news affect you as a consumer?

• If you have money in a savings account or money market fund, your return is 0%. Nothing. After expenses some funds may charge you for parking your money there.
• If you have a Home Equity Loan or credit card debt which floats with prime rate, your rate and costs will drop.
• If you own a home and have a mortgage, chances are refinancing your mortgage will save you money.
• If you are looking to buy a home, the lower mortgage rates just gave you the equivalent of a pay raise (As a first time home buyer you are also eligible for the $7,500 tax credit – this means a big pay raise).

The Fed’s goal is to make mortgages affordable and get the credit markets flowing again. Mortgage rates were low before, they are now unbelievably low. This means that even those who closed with historically low mortgage rates before, may have a chance to save money by refinancing again. The question I’m getting now is, how long will the low rates last? In their statement the Fed said they intend to keep rates low for an extended period of time. Some people think that with the rates this low and all the money being pumped into the economy, that we are setting the stage for inflation and higher interest rates down the line. That may be the case, but we are looking at least two years before that will happen. The economy is in a deep hole now, and the top priority is to fill the hole before we all fall into it. I don’t expect mortgage rates to rise soon, but there are still a lot of reasons to take advantage of the low rates now rather than waiting to see if they get even better:

• With home prices still spiraling down, we are seeing more appraisal value issues. The lowest home prices of the year usually happen in the winter months when fewer home buyers are out looking and the sellers are the most motivated. Any sales now will be comps tomorrow. If the value is too low this will hurt your chances of refinancing to a better rate.
• Mortgage guidelines continue to change. Even as the Fed tries to make mortgages more affordable, lenders continue to tighten their guidelines. If you can accomplish what you need to now, it probably doesn’t pay to wait.
• You know the old saying about a bird in the hand. No one knows what will happen to rates or when the low will be. If you are saving money now, it is worth doing. Most of the refinances we are doing now are no cost refinances where you are not paying any bank fees or closing costs. If the rates drop lower you can always refinance again without losing any money.

If you are thinking of refinancing or would like to see how a refinance would benefit you, or if or if you are getting ready to start looking at houses to buy, give me a call and I will let you know what we can do to help. And we should all be thankful that Ben Bernanke decided to play Santa this year.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

I’m thinking of refinancing my mortgage, but I heard that rates are going down to 4.5% soon. Should I wait?

This is a question I’ve been getting a lot lately. This was a leak from Treasury Secretary Paulson’s office a few weeks ago about a program they were supposedly  looking at. This program would apply to purchases only, so it wouldn’t effect refinance rates, but even for purchases this is more of a random idea rather than a well thought out plan. The President-elect’s team said they were not involved in any planning, so the chances of this actually coming out appear to be slim.

The thinking behind this goes something like this. In order to get the economy moving again, the real estate market needs to stabilize. If mortgage rates are low enough, more home buyers would be willing to buy homes. This makes sense, but the details are the problem. The government doesn’t control mortgage rates. Mortgage rates move up and down based on activity in the mortgage backed securities market. Traders buy and sell these mortgage bonds in order to hedge their own contracts and as a way of anticipating where rates will be in the future. In order to get rates to 4.5%, the Treasury would have to buy down the rate, the equivalent of paying points, and it would cost a tremendous amount to get the rates down. It then comes down to bang for the buck. Is this the best use of government money, to subsidize the rates for a small slice of home buyers, when there are so many other needs? My guess is that this plan is already dead on arrival.

The bigger question is will mortgage rates get down to 4.5% on their own? And the answer to this is, maybe, but no one knows. Mortgage bonds and mortgage rates typically move based on economic news and the prospects of inflation and the over all strength of the economy. To put it simply, bad news is good news for mortgage rates. Lord knows we’ve had plenty of bad news lately. But the situation has grown more complicated in the last year. Many large investors that used to buy mortgage backed securities have stayed on the sidelines staying away from anything that could be a risk. The spread between long term and short term securities is at a record high, as is the spread between mortgage bonds and treasury bonds. Rates could fall further, but the last two times that rates dropped, they bounced back up after a short time. The old saying is that a bird in the hand is worth two in the bush. If refinancing now would help your situation, it makes sense to take advantage of the opportunity now. If they drop lower later, you can always refinance again (especially if you do a no cost refinance, and don’t have to pay extra cash).

Can I refinance my first mortgage to a lower rate if I also have an existing second mortgage?

Yes, but it might not be as easy as it used to be. Whenever you have a second mortgage or home equity loan, we will need to get a subordination agreement from the lender. A subordination agreement says that the lender with the second mortgage will keep their lien in the second position, and not try and jump in front of the new first mortgage when the old loan is paid off. This has always been standard procedure with refinances, and it used to be an automatic that the second mortgage lender would grant the subordination. The lender would usually need to know the terms of the new first mortgage along with a copy of the new appraisal and title and often a check for $50 or $100 for their efforts. Some lenders were faster than others, but it was rare that a second mortgage holder would not allow the new refinance.

This has changed somewhat in the last year. With property values down in many areas, second mortgages and equity lines that looked safe before are now considered risky. If the homeowners are not able to make their payments, and the property has to be foreclosed, the first one to lose will be the second mortgage holder. This is a big problem with loans that were taken out in the last several years. When home values were climbing, second mortgage lenders got more aggressive, and it was common for them to make loans up to 100% of the home’s value. Now, these loans are under water, the property isn’t worth as much as the loans on the home. This means big losses for the companies that make home equity and second mortgages. As a result, many banks have stopped making these loans entirely, or have tightened their guidelines so that they will only make these loans if the home has a lot of extra equity.

Now, when these lenders get a request for a subordination agreement, they are not so anxious to grant it. Some lenders have stopped granting them entirely, but most are looking at the specific situation and seeing if the new loan will put them in a better position, or not. In order to get the subordination you will need to have a good cushion of equity. If you are thinking about refinancing and have a second mortgage or home equity line, this is one thing you or your loan officer will need to check on right away.

If I change jobs, will that hurt my chances of qualifying for a mortgage?

No, it shouldn’t make a difference if you are still in the same line of work and your income will be the same or better. There are a few things to keep in mind if you are going to change jobs, though. With some jobs you start out on a probationary period and are considered a temporary worker. If this is the case and the employment verification shows you are temporary, it will be a problem. Another thing to consider is how will you be paid? If you are paid by a salary and your income is the same from paycheck to paycheck, no problem. But if a big part of your income comes from overtime, bonus or commissions, and these aren’t guaranteed, this could be an issue.

If you plan to buy a new home in the near future and you are thinking of changing jobs, run the information by your loan officer beforehand, just to make sure this won’t hurt your chances of being approved for a mortgage.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

Welcome to Illinois Mortgage Rates and News week in review for the week ending December 12th, my take on the week’s financial news and how it affected Illinois mortgage rates.

This is usually the time of year when business starts slowing down in anticipation of the Holiday season. This is usually the time for Christmas shopping and Holiday parties, and business productivity often takes a back seat to seasonal cheer. In most parts of the economy business is slowing down, but it isn’t a result of excess cheer. It’s still hard to find a parking space at the shopping mall, but too many of the stores are having going out of business sales, and the reports show there are more shoppers than buyers this year. When the news is all doom and gloom, more people feel anxious about their jobs and their financial well being, and are holding onto their wallets a little tighter than in years past. The one bright ray of hope in this dark scenario is mortgage rates. Mortgage rates fell again this week, and are now at the lowest point of the year.

The big economic news this week concerned the auto bailout plan. With auto sales tanking and credit dried up, the big 3 automakers are in a downward spiral. Reports are that they have only a few weeks of cash left to continue operations. There is no doubt that they will need more money down the road, but it looked like a plan was together to give them a mini bailout, so they had enough cash ($15 billion) to limp into the new year when a longer term solution would be the new president’s problem. The deal feel apart on Friday as some, mostly Southern, Republican Senators, played a game of chicken with the economy. The Big 3 have been in bad straights for quite some time, but it was the credit crunch that actually pushed them off the cliff. In order for them to be viable long term, they will need to refocus and get more concessions from the unions, dealers, parts suppliers and all the other parties that have a stake in their continued existence. That isn’t going to be an easy process, and it is going to take time if it has any chance of working. Pushing the Big 3 into bankruptcy would force the issue, but it would also cost the economy up to 1,000,000 jobs at the worst possible time. It now looks like President Bush will now release some of the TARP money, a position that he was against before, to keep the automakers going.

An unusual thing happened in the Treasury Bill market this week as short term rates dropped to zero – below zero when you consider transaction charges. The question is, why would someone buy treasuries if they are guaranteed to lose money? One answer is that with fear in the air Treasuries are the safest place to have money, and it is worth a small loss to know that your cash will be available when you need it. Another reason may be that this is a result of the big banks parking the money they got from the TARP fund, and they are willing to take the loss in return for high liquidity, rather than the risk of lending it out. This is an unusual occurrence, but we may be seeing this more often as rates bump along the bottom.

Mortgage rates have continued to drop and we are now at the best rates for this year, and the best I have seen in the 16 years I have been in the mortgage business. This could be a great opportunity to refinance your mortgage and lower your monthly payment – if you qualify. It used to be that every time the rates dipped it would mean a huge refinance boom. We are in another refi boom, but not everyone will see the benefit this time. Loan guidelines are stricter than they used to be and the no income verification and stated income loans are all gone. Property values are lower too, so even some people who had equity when they bought, may have a hard time refinancing. That being said, lowering your mortgage can be the equivalent of getting a raise at work. Depending on your loan size and how long you plan to stay in your home, you can save money even if your rate now is in the 5s. If your rate is above 6.0%, refinancing is probably a no-brainer. Most of the refinances we do are no-closing cost refinances (at a slightly higher rate than you could get if you paid the closing costs yourself) and often with no money out of your pocket at all, so cost shouldn’t be an issue. If you are in an FHA mortgage, you can do an FHA streamlined appraisal with no credit qualifying and often no appraisal needed.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), 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      5.00%      5.176% APR

15 Year fixed Rate     4.875%     5.069% APR

5-1 A.R.M.                 5.125%      5.246% 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.                 5.375%       5.598% APR

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate      5.00%      6.034% APR

With no origination fee – 60 day lock

30 year fixed rate      5.50%      6.147% 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.

The Fed meets again next week and it is expected that they will drop rates again. As they approach zero, that removes the main weapon from their arsenal. More on this in next week’s edition.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

Last week was a busy week, and being busy, I neglected an important (for me) anniversary. This blog, Illinois Mortgage Rates and News, turned 1 year old last  week. One year is not a long time. One year old babies still can’t speak and crawling is usually the favored form of locomotion. On the other hand, thousands of blogs are born every day, and most of them only last a post or two before going down for the count. Based on that standard, we are close to middle aged in blog years. Well, maybe not middle aged, but we are well past the crawling stage and moving along quite nicely.

There have been a lot of changes in the mortgage industry in the year since this blog started. The mortgage implosion was underway when we started last December, but it picked up steam and moved from the housing market into an infection of the general economy. Housing prices have plummeted and the security markets are in a state of constant stress. There is no doubt that these are challenging times.

But challenge means opportunity, and with home prices at their lowest point in years and interest rates bumping against their historic lows, opportunity abounds. Right now we are in the midst of another refinance boom, and even as fear rules the market, first time home buyers are seeing the opportunities and coming out of the woodwork looking for bargains. But to take advantage of these opportunities people need to understand how the system works and how to position themselves for success. Helping home buyers and home owners understand mortgages and be able to make the right decision for their situation, has been the mission of this blog from the start.

If you have been a regular reader, thank you. If you are new, please stick around. My goal is to provide the information you can’t find elsewhere and help make sense of a crazy, crazy mortgage and real estate market.

So thanks again, and happy birthday to me….

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

Welcome to Illinois Mortgage Rates and News week in review for the week ending December 5th, my take on the week’s financial news and how it affected Illinois mortgage rates.

It’s a year late, but the news is that it is official, we are in a recession. But you probably already knew that. The National Bureau of Economic Research, the official arbiter of these things, came out with the official declaration that the recession started last December. As a friend of mine said, that has to be a great gig. It’s like a weatherman who tells you what the weather was like yesterday. Or someone who tells you not to step in the wet cement, after your foot is already stuck. I’ve been in a football pool for years, and I know that my winning percentage would be much higher if I could pick the winners after they played the games. We are in a recession and from all signs, we will be in this for a while.

The latest news to confirm this was the release of the employment report Friday morning. Everyone was expecting a bad number, companies have been shedding jobs with gusto in the last several months. The expectation was for losses of over 300,000 for the month of November, which would have been bad. The real number came out at a loss of 533,000 jobs, a devastating report. The previous two months were also revised downward, so over the last three months the economy has lost over a million jobs. Retailers usually get their biggest bump for the year in the Christmas season, but it is pretty clear that this will be a gloomy season for holiday sales.

On the bailout front, the Big 3 automakers were back for another try. This time they drove themselves up in cars, and laid on the humble pie. They are all short on cash, and unable to get credit, there is a real risk of failure. There is no telling if they can change their focus and become viable long term, but if any of them were to go out now, it would be a disaster. The job losses from a failure piled on to the jobs already lost, would stress the economy even more and cost the states a fortune in unemployment. Some economists say the bailout makes sense as just a work program to keep people employed. The White House has been against using the TARP funds for the auto bailout, and other funds available won’t be enough. It looks like they will tap into some funds allocated for fuel economy to keep them on life support until the Obama team gets in and a bigger bailout will probably go through.

With all the bad news out there, fear is the biggest problem. Each piece of bad news makes both businesses and consumers pull back a little more, and as they pull back it insures that the next round of news will be worse. At the same time, the government is in limbo now as we face the transition to the new presidency. Trillions of dollars have already been pumped into the economy, and trillions more are on the way. But for now the old president is waiting to go  and isn’t coming up with new rescue plans, and the new president hasn’t taken over and can’t put anything into place until he does, so it is a waiting game. The cavalry is coming, but will they get there in time?

The one good sign amid all this gloom is that mortgage rates are dropping. Mortgage bonds are bouncing around in a channel, but interest rates are near the best they’ve been all year. If your mortgage is at 6.0% or higher, you would probably benefit from a refinance. A lot of people think that it costs a lot to refinance, but most of the refinances we do are with no closing costs and often with no money out of your pocket at all. If you are in an FHA mortgage, you can do an FHA streamlined appraisal with no credit qualifying and often no appraisal needed. If you are in a conventional mortgage you can benefit from a no-closing cost refinance. In a time when everyone watching their pennies, a mortgage refinance is a good way to save some dollars.

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      5.50%      6.147% 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.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

After the big drop in mortgage rates last week, we are in another refinance boom. Rates are near their low point for the year, and though they are bouncing around from day to day, this is a great opportunity to get your rate down and save some money. December is usually the time when the real estate market slows down as home buyers are more interested in Holiday parties and Christmas shopping than schlepping through the snow looking at houses. It is also the time when most of the mortgage support staff (appraisers, processors, underwriters and loan closers) catch up on their down time and take their vacation days before they expire at the end of the year. So it is almost a rule that the mortgage industry runs shorthanded in December. What this means is that a lot of people in the mortgage industry are going to be pulling their hair out trying to get extra work done with fewer people to do it. But these are good problems to have, and I would much rather have extra business than too much time on my hands.

Refinancing makes sense for a lot of different situations. Any one who bought a home earlier this year and has a rate over 6.0% is going to have a chance to reset the loan and lower their payment. If you have an adjustable rate loan and you want to fix the rate, this is the time to do it when the rates low. If you have equity in your home and too much consumer debt, a debt consolidation loan can save you hundreds of dollars each month. If you have an FHA loan, you can take advantage of the FHA streamlined refinance program where you don’t have to qualify for the new loan, you just need to show your mortgage is up to date. Depending on your situation, you might be able to do this without even getting a new appraisal.

So there are a lot of good reasons why you might want to refinance, but the problem is taking advantage of the opportunity and getting your loan closed as quickly and smoothly as possible. The surge in loan volume makes the mortgage industry look like a pig that’s just been eaten by a snake. With so much volume there are going to be glitches, and the process will slow down as support staff gets overwhelmed. I normally close refinances within 30 days, and I am trying to get as much as possible through the system and closed in December. But mortgages have a 3 day right of rescission (3 business days when the consumer can change their mind about going through with the refinance), and we have the Holidays off, so the loan will have to be approved and ready to close before Christmas to close by the end of this month. To take some of the stress off I’m locking my loans for a little longer, just in case.

If you are looking to refinance your mortgage, here are some things you can do to move yourself to the front of the line and get your loan closed quicker and with less hassle:

Be prepared to act fast – We’ve had two other rate drops this year, and both times the best rates only lasted a short time. I think there is reason to believe that low rates will stick around longer this time, but the market has been incredibly volatile and when we do reach the lowest rates, the lender lock systems are often overwhelmed with volume. When the time is right you need to act fast.

Get your paper work in on time – I’ve spent the last week calling past clients and letting them know it’s a good time to refinance. Once your loan is locked in, the clock is ticking. We need to get all your paperwork through and your loan closed and funded before the clock stops. Getting your paperwork in is the first step. If you hold on to the loan documents for a while before getting them back to me, that means wasted time. The longer you hold onto the paperwork the harder it will be to close your loan on time.

Send in a complete loan package – To close your refinance we will need documentation on your income, assets and work history. Your loan officer will give you a complete list for your personal situation. If you send back everything that is needed, this makes everyone’s life smoother. Some of the items we may need include:

• 2 years W2s (Full tax returns if you are self employed).
• Current paystubs for the last 30 days.
• 2 Months of your current bank statements and other asset accounts – all pages attached.
• A copy of your mortgage statement.
• A copy of your most recent tax bill.
• Copies of your driver’s license or other photo ID.
• If you have a home equity loan or second mortgage, we will need a copy of the note to subordinate the loan.
• The name and phone number of your insurance company.

There may be other things needed depending on your situation. Getting everything needed up-front saves time and aggravation.

Make yourself available for the appraisal – For most refinances we will need a new property appraisal. The appraisers are going to be the first group to be overwhelmed. If you can be flexible and allow the appraiser in as soon as possible, this will help with your loan timing.

Refinancing your mortgage can be a great way to save money in a tough economy. The process will go smoother if you are prepared.

Illinois Mortgage Rates and News                     First time home buyer loans

  Do you Twitter? For daily mortgage updates, follow me at @PTmortgage