Welcome to Illinois Mortgage Rates and News week in review for the week ending January 9th 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

Mortgage rates fell this week and are now at the lowest level in generations. Not years. Not decades. Generations. This is good news if you are able to refinance your mortgage or are in the market for a new home, but the reason these rates are so low is because the economic news is so grim. The unemployment numbers released yesterday were just as bad as everyone expected (though better than some had feared) with a loss of 524,000 jobs in December and a total of over two and a half million jobs lost in 2008. The unemployment rate is now at 7.2% and many experts say that with so many people working part time and those who have given up looking, the real number is higher. Like I said, the news is grim. But bad news for the economy translates to good news for mortgage bonds, and that means lower mortgage rates.

Another reason that rates improved so much this week, was because the Fed, in a move to stabilize the housing market, stepped in and started to buy mortgage backed securities. Rates first started going down in mid December when the Fed announced that they would buy $500 billion of these bonds by the end of June. This week they are off to a good start, with a purchase of $10 billion for the week. Continued buying may drive the rates lower, but with the lenders pipelines full to the point of bursting, it’s doubtful that they will pass the savings on to consumers any time soon.

We are in the midst of a huge refinance boom and this changes the way that the whole industry does business. Over the last year volume was down and the goal was to cut costs and operate lean. The fat was cut out of the system, then the muscle, then the bone. Mortgage support people left for new careers and the industry was downsized to fit the market, which was driven mainly by home purchases. The lower rates mean that people who never dreamed that they would refinance again, thinking that rates hit rock bottom back in 2003, are now back in the market for a new mortgage. So now appraisers who were taking a week to get an appraisal done, are now taking a couple of weeks. Loan processors are trying to manage a pipeline that has at least tripled or quadrupled overnight, and underwriters are finding that there aren’t enough hours in the day to get everything done. As the wave moves through, loan closers will get overwhelmed and the title companies will run out of times available to close the loans. Eventually the industry will catch up, but no one wants to bring on new people unless they know that they have to. They are at a point now where they have to, and there are good people available, but it will take some time before the system balances out.

So what does this mean to you as a consumer? For one thing, if someone offers you a rate and it is locked in for 30 days, chances are you’re not going to close on time. Mortgage rates are priced based on how long the rate is guaranteed. The longer the guarantee, the better the pricing, so a 30 day lock is priced better that a 45 or 60 day lock. But it takes time to close a loan in the best of times. There are a lot of moving parts in the mortgage process, and if one part gets delayed, it effects everything else. Take out the weekends and that 30 day lock is considerably shorter, and by Illinois law there is a 3 business day right of rescission (after closing, when you can decide that you don’t want to go through with the loan), which cuts more time out. If your lock expires before your loan is funded, the rate you were quoted disappears. In a time like this it is best err on the side of caution. I’m locking most loans for 60 days now, to make sure they get done without a problem.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc purchase on a 60 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      4.875%    5.086% APR

15 Year fixed Rate     4.50%      5.046% APR

5-1 A.R.M.                   5.00%      5.146% 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.

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