The real estate market here in the Chicago area is heating up. Traditionally the Spring market is the most active time of the year for home sales, and as the weather starts warming up here, the market is getting warmer, too. Most of the activity is still in the lower priced category, and first time home buyers are the biggest part of the market now. There are some big reasons why first time home buyers are the focus now. Most importantly, they don’t have a home to sell. I’ve talked to a lot of home owners who would love to move and find a home with more room for their growing family, or a place which meets their needs better than their current home does. But in order to do that, they would have to sell their current home first, and right now that is a hard pill to swallow. Home prices are down, and even if move up home buyers can afford it and can get a great bargain on the larger move up home, psychologically it is tough to admit that the home they have now is worth much less than it was just a few years ago. There is pent up demand, but my guess is that the real estate market won’t really take off again until after the economy is humming again, when interest rates are higher and inflation is in the air. So for all intents and purposes, this is a first time home buyer’s market.

There are some big reasons why first time home buyers are in the market now:

• Home values are down and affordability is up. Much of the activity is focused on short sale and foreclosed properties, and these are coming in at prices we haven’t seen in years. This is a buyer’s market, and buyers have the leverage to get real bargains now.

• Interest rates are low. Mortgage interest rates are bouncing around record lows. This ties into affordability, and if you are able to buy a home at a low price with a low fixed rate mortgage, your cost of home ownership is way down.

• The government is paying first time home buyers to buy homes now. The $8,000 tax credit means that first time home buyers will be able to write off 10% of the value of their new home, up to a maximum of $8,000 if they buy a home before November 31^st of this year. This means that the government is offering a discount for first time home buyers.

• Low down payment mortgage financing is available. FHA is the go to financing for first time home buyers here in the Chicago area. The down payment is 3.5% and if that money is hard to come up with, it can all come from a gift. FHA also allows for a seller credit of up to 6% (you don’t need that much) so the contract can be structured so that the seller is paying for your closing costs. FHA has also increased the maximum loan size it will take on up to $410,000 in Chicago and the surrounding suburbs, so it works for more situations now than it ever has before.

No one knows what will happen with the economy or how quickly the real estate market will recover. Unemployment is still growing, and there is a lot of fear in the air. Some experts that have been right since early on are saying that home prices could fall further. But if you are planning on being in the home for at least five years (and you shouldn’t be buying if you aren’t planning on being there for a while) it is hard to see how this isn’t a great time to buy. As the economy gets back on track, and it will eventually, more home buyers will gain confidence and the real estate market will return to a new type of normal. Over time home prices will increase, and mortgage rates will pop higher. My guess is that a whole lot of people will be kicking themselves for not buying when they had a chance. If you are a first time home buyer, or thinking about becoming one, you have control of the market now.

Illinois Mortgage Rates                   First time home buyer loans  

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Welcome to Illinois Mortgage Rates and News week in review for the week ending April 24th, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

With no major economic news released and no big announcements or surprises of any kind, this was a boring week in the mortgage world. But that’s not a bad thing. Boring is another word for stable, and it has been a long time since the mortgage market has been described as stable. This mortgage market has been ruled by volatility and it hasn’t been out of the ordinary for lenders to re-price two or three times within a single day. This is one of the things that most consumers aren’t aware of, that rates are constantly changing and the rate quoted in the morning may have expired before the afternoon hits. (This is why it makes no sense to shop mortgages by looking at ads in the newspaper, when the rates quoted were probably out of date before they were even posted.) But that was then and this is now. This week there were ups and downs both during the day and over the course of the week, but the fluctuations were small and all fit in a tight range. I’ll take boring and stable over the adrenaline inducing shift from highs to lows and back again, any day.

As I’ve written before, there is one big factor behind this new stability. The Fed is buying mortgage backed securities and the Fed rules the market. Over the last few months we have had swings in prices, but even when rates spiked higher, the Fed was there to provide a ceiling on how high the rates could go, and keep mortgage rates much lower than they would otherwise be. Now, the other market participants are adapting to this new reality and that means they are trading opportunistically as mortgage bonds move up and down, but they are keeping in the range the Fed has set. This means stability. I don’t know that rates are going to fall much further, every time they drop to the low point of the range they pop right back up. But I don’t see rates heading a lot higher any time soon, either. At least that is the view this week. Next week a new set of data or a new treasury announcement could come out which will throw the market out of this range, but for now I am enjoying the relative calm.

As to the economy in general, there is hope that we may be nearing the end of the worst phase, and while boom times might not be ahead, we are starting to stabilize. Fed Chairman Ben Bernanke talks about evidence of “green shoots”, home sales came in better than expected, industrial production while awful was also above expectations, and some experts think that job losses have peaked. That is the good news. On the dark side, Chrysler may file for bankruptcy this coming week and GM is in the same dire straights. If this happens ripples of pain will radiate out throughout all the support industries and we may sink lower. A lot of new information is coming out next week, and a lot of events which have the power to move mortgage rates, possibly out of the current range. The Federal Open Market Committee is meeting Tuesday and Wednesday, and while there is no chance that they will raise rates (and with rates effectively at 0 they can’t lower them), what they say in their announcement can move the markets. The Treasury will also be auctioning off more bonds and the increase in supply could put pressure on mortgage rates. With consumer confidence, initial jobless claims and several other reports due out next week, we may not see the same calm seas in the mortgage market next week.

Mortgage rates this week are virtually unchanged from last week. We are still in an all time low range, and if you are in the market to buy a new home in the Chicago area, or refinance your Illinois mortgage, this is a great time to take advantage of the low mortgage rates. The Home Affordable DU Refi Plus program is also out, and this allows many home owners to refinance at low rates even if they have lost equity in their home.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates 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%     5.069% APR

15 Year fixed Rate           4.625%     4.724% APR

5-1 A.R.M.                        4.50%        4.701% APR

For Jumbo loans over $417,000

30 Year Fixed Rate*          5.75%       5.894%

*Best rates are based on 70% LTV, 760 and above FICO single family homes.

7-1 A.R.M.                         5.125%       5.279% APR

(For smaller Jumbo loans another option is to break your loan into 2 parts – conventional to the limit and a HELOC or second mortgage for the rest.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

With 1 point origination fee – 45 day lock

30 year fixed rate              4.75%      5.339% APR

With no origination fee – 45 day lock

30 year fixed rate              5.00%      5.523% APR

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan.

VA Veterans Administration 0 Down Loans

With 1 point origination fee – 45 day lock

30 Year Fixed Rate           5.00%     5.178%

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 Mortgage Rates                   First time home buyer loans  

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The mortgage market has shrunk dramatically over the last 2 years. Not in volume, thanks to low rates and a refinance boom volume is strong. But the market has shrunk in the what types of mortgages are available. There used to be a wide variety of mortgage options available but with the mortgage meltdown the options have narrowed so that the only mortgages currently written are conventional and Government fixed rate loans. Many of the now extinct loans (Sub Prime and Option ARMs) were exotic varieties which were appropriate for some situations, but were abused and rolled out to borrowers who didn’t fit the profile for benefitting from the loan, often didn’t understand what they were getting in to, and these abuses were a big cause of the mess we find ourselves in. One of the biggest casualties of the mortgage melt down has been Jumbo loans, but they might be making a comeback.

Jumbo loans are mortgages which are above the Fannie Mae lending limit of $417,000. This means that they are too large and not eligible to be bought by Fannie Mae or Freddie Mac (that is, the government) and anything that isn’t sold to the government has pretty much disappeared. Jumbo loans used to be priced at a premium to conventional loans, but the premium used to be small. Since Jumbo loans are made to those who are own or are buying larger homes, the borrowers usually have high incomes, high assets and high credit scores, which made them low risk borrowers. But the problem wasn’t tied to the borrower’s risk profile. Jumbo loans have been scarce because most of the Jumbo mortgages were bundled together with other Jumbo loans, securitized and sold in the mortgage after market. When the whole securitization market collapsed most of the Jumbo mortgages disappeared with it. There have been some jumbo options (usually ARMs) offered by lenders, often regional banks, which keep the loans for their own portfolio. The big lenders have had fixed rate Jumbo loans available, too, but at prices so high they were not a serious alternative.

It looks like this situation is starting to change. A few big wholesale lenders have dipped their toes into the Jumbo market, and we now have one lender who is pricing aggressively. Risk is still an issue and in order to qualify you will need to have great credit, verified income, strong equity and lots of reserves. In other words, they want loans that will perform even if the housing market gets worse. But if you are in a Jumbo loan and want to refinance, or about to buy a home in the jumbo category, you now have some options that weren’t available before. If you are in the market for an Illinois Jumbo loan, give me a call.

Illinois Mortgage Rates                   First time home buyer loans               

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Welcome to Illinois Mortgage Rates and News week in review for the week ending April 17th, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

Optimism is alive on Wall Street. Stocks are seeing the sunny side of things and the rally is still in place. There some signs that the economy is stabilizing, or at least starting to come out of its free fall. Consumer confidence is a little better than expected, the Fed Beige book shows some signs of moderation in the level of decline and the big banks all came out with record earnings this week. With all the money being pumped into the economy it should be pulling out of its dive, but we are still flying at tree level. We may have avoided the crash, but it is doubtful that we will be gaining altitude anytime soon. Consumers are still ruled by fear and caution, and aren’t likely to go out and spend if they don’t need to, and the job picture is still bleak. The bank profits are a different story.

One of the biggest worries on the economy is the health of our banking sector. The whole economy runs on credit. If the banks aren’t solvent, they won’t be in a position to make loans which means are economy will be stuck in low gear. The Government has pumped money into the big banks with TARP funds, extra access to the credit markets and by setting the rates they borrow at zero percent. Even still, the banks are pulling back on credit. We are in a refinance boom and the big banks are making a lot of mortgage loans, but only those (conventional loans, FHA and VA) which they can repackage and sell back to the government. Because they are working close to their capacity on these loans, they are making a higher spread than they normally would. That is, they offer competitive rates when they need more loans, but set the rates higher when their pipelines are fuller. This means they are using free government money to make loans which they can then sell back to the government at fatter margins then they normally would receive. This is a good recipe for record profits, but unless they do something to get rid of the bad debts on their books, it won’t change their long range outlook and they won’t begin lending in a way that will really help the economy. So the fact that they are reporting record earnings is more a matter of their taking advantage of the system then that they are over the hump.

Mortgage rates ended the weak on a down note, but still slightly better than where they were at the end of last week. Over the last weeks it’s starting to become almost a predictable pattern (which is sure to change now that I write this) that mortgage rates get better in the beginning of the week and worse by the end. Rates were great through Wednesday and then we had big sell offs in the mortgage backed securities markets on both Thursday and Friday. Even with a sharp uptick in rates, we are still in a channel which mortgage rates have been going up and down between a high and low point. Every time they reach the low point (Tuesday and Wednesday of this week) they bounce higher, and when they reach the high point of the rate range (we are almost there now) they would turn around again and go back in the other direction. Because this has happened in the past doesn’t mean it will continue to happen. At some point interest rates will go out of this channel, either higher or lower, and will then be in a new range. The big thing that has made the market as stable as it is, is the Fed commitment to buy mortgage backed securities in order to keep rates low so more people can refinance into lower rates and lower payments. The Fed backing means that rates won’t go as high as they would other wise, but it takes more than just their buying to make the market. Mortgage bonds are at a key level of support now. If the past behavior holds and they bounce off the support, rates will stay in the pattern. If not, rates may go higher for a period. Either way mortgage rates are near all time lows and with the new Home Affordable DU Refi Plus program rolled out, refinancing is now available for more home owners who couldn’t take advantage of the low rates before.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates 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%     5.069% APR

15 Year fixed Rate           4.625%     4.724% APR

5-1 A.R.M.                        4.50%        4.701% APR

For Jumbo loans over $417,000

30 Year Fixed Rate*          5.75%       5.894%

*Best rates are based on 70% LTV, 760 and above FICO single family homes.

7-1 A.R.M.                         5.125%       5.279% APR

(For smaller Jumbo loans another option is to break your loan into 2 parts – conventional to the limit and a HELOC or second mortgage for the rest.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

With 1 point origination fee – 45 day lock

30 year fixed rate              4.75%      5.339% APR

With no origination fee – 45 day lock

30 year fixed rate              5.00%      5.523% APR

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan.

VA Veterans Administration 0 Down Loans

With 1 point origination fee – 45 day lock

30 Year Fixed Rate           4.875%     5.064%

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 Mortgage Rates                   First time home buyer loans  

We Lend in All 50 States

Rates are down again near all time lows, and the opportunity to refinance your mortgage and save money by lowering your rate has been one of the few bright spots in a gloomy economy. That is, it’s been a bright spot for those who were able to refinance, but for the most part, those refinancing have fit into one of two categories, well qualified borrowers who had plenty of equity in their homes, or home owners with FHA loans who could take advantage of the FHA Streamlined Refinance program. There have been too many otherwise well qualified home owners who weren’t able to refinance because their home values had declined. The economy can’t recover until the housing sector is on the upswing, and the Obama administration has made it a priority to help more people refinance and lower their payments in spite of these circumstances. Home Affordable Mortgage, also known as DU Refi Plus or just the Obama Mortgage Plan, is a program to allow these homeowners to refinance to a better rate, even if their home has lost value to the point where the mortgage is slightly higher than what the home is currently worth.

DU Refinance Plus is a Fannie Mae program to refinance loans which are currently in its portfolio. Your mortgage is likely serviced by another company, but most loans are owned by one of the big Government Service Enterprises, Fannie Mae or Freddie Mac. Here is the Fannie search page to see if your loan is eligible for the program. DU stands for Desktop Underwriter, and it is Fannie’s automatic software which mortgage bankers (like me) and mortgage brokers use to approve loans every day. The process works like any other loan, but if the loan is eligible for the DU Refi Plus program it will be listed in the findings along with the specific conditions for documentation and appraisal that need to be met. I ran a few of these yesterday the process is simple. One of the big benefits was to buyers who bought with a 20% down payment, but because of the decrease in home values, they would have had to pay mortgage insurance if they refinanced. With this program they go back to the conditions when they first purchased their home, and if they didn’t need mortgage insurance then, they won’t need it now.

The Obama administration expects that the DU Refi Plus program and related programs could help as many as 9 million home owners refinance, and with the savings from the refinances often reaching hundreds of dollars per month, this could have a big impact on the economy (not to mention the effect it has on your own cash flow). This is possible, but there are a lot of moving parts to the Obama refinance program, and all the parties involved will have to follow the program as it is intended for it to get the most benefit. DU Refi Plus has made the guidelines, but each wholesale lender can choose how they interpret these guidelines and they can change what they are willing to accept in order to meet their own standards. If the loan had mortgage insurance when it was first taken on, it will need mortgage insurance again, and the MI companies will need to cooperate (most have signed on, but we’ll have to wait and see if they add their own criteria). Also, if you have a second mortgage or home equity loan, the second mortgage holder will need to subordinate the mortgage , and unless they have a change of heart (make that government incentives to do so) that is not going to happen. Most second mortgage lenders are pulling back and only subordinating loans which have a strong equity position. In other words, they will only subordinate for those who need it the least.

There are some issues to get through before this program reaches its full potential, but it will help a lot of people just as it is. Here are some of the features of the new Obama mortgage plan, DU Refi Plus:

• It is available through all Fannie Mae approved lenders.
• The old mortgage needs to have been paid on time and can’t have any 30 day late payments in the last 12 months.
• Mortgage insurance is based on how the loan was set up originally. If you bought with at least a 20% down payment and didn’t have mortgage insurance, you won’t need it now. If you had mortgage insurance originally, but you had the MI canceled or terminated afterwards, you won’t need it now. Otherwise the new loan will be set with the same level of MI coverage as it was originally, and lenders are encouraged to get the lowest cost option for the buyer.
• The borrowers on the new loan must be the same as those on the old loan (new borrowers can be added as long as all the old borrowers remain on the loan).
• Maximum loan to value ratio is 105% (that is, the loan can be up to 5% higher than the current value of the home).
• There is no limit on the combined loan to value when you factor in second mortgages and home equity loans, but the second mortgage holder will need to agree to subordinate their loan to the new first mortgage.
• The property can be your primary residence, a second home or an investment property and include all property types (single family homes, condos, multi unit properties).
• The new loan will be your choice of a fixed rate or an ARM that is fixed for at least 5 years.
• These are rate/term refinances only, that is you can add your closing costs into the new loan amount, but you can’t take out any extra cash.
• No minimum credit scores are required, but the loan has to be passed by the DU software approval, and there are loan level price adjustments for lower credit scores (but these are better than the price adjustments currently put on conventional loans).
• Condos won’t have to go through a new project review. You will need to be able to show that the condo did meet Fannie Mae guidelines at the time you took on the new loan.
• The DU findings will determine what type of appraisal is required. This could be a full appraisal, a drive by appraisal or none at all.
• Normal underwriting rules apply and the loan has to be underwritten through DU and the debt ratios have to be within the stated guidelines.

There are some loans which will be ineligible:

• These include sub prime loans, Alt A loans and loans which were approved under DU’s expanded approval, as well as reverse mortgages, second mortgages and government loans or Jumbo loans.
• The program is also not available for borrowers in loans which are fixed for less than 5 years, ARMs that have negative amortization, balloon loans or My Community minimum down payment mortgages.

It will take a little while to see how all these pieces fit together, but this is a program that will help a lot of people right now. If you would like  more information on how this program works, or to see if you qualify, let me know.

Illinois Mortgage Rates                   First time home buyer loans               

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Welcome to Illinois Mortgage Rates and News week in review for the week ending April 10th, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

It’s not every week when the president says that more people should take the opportunity and refinance their mortgages, but that happened this week. So much of the fate of the economy is tied to strengthening the housing sector, and low mortgage rates are a big part of the solution. Because of the low rates we have been in a refinance boom for the last several months, but there have been too many borrowers who aren’t able to refinance because their homes have lost value. President Obama made a presentation to announce the start of his new mortgage program, Home Affordable. This program is designed to help home owners who are otherwise well qualified, refinance up to 105% of the loan’s current value. I will have a full write up on how this plan will work, and who will be most likely to benefit, in the next few days. It won’t help everyone, but it will be a way for a lot more people to lower their rate and lower their mortgage payments.

Mortgage rates this week improved through the beginning of the week and then got worse as the week came to a close. There weren’t a lot of economic reports out this week so mortgage bonds moved up and down based on technical factors and what was happening in the stock market. The movements in the market were magnified because it was a holiday week and many traders were off, so the volume was low. At the beginning of the week the outlook for corporate earnings was low, the stock market got killed and the bond market benefitted, brining rates down. Near the end of the week Wells Fargo, one of the biggest banks, announced record profits, and the conventional wisdom was that the worst of the crisis is over, so the stock market soared and rates popped up again. In a way it’s not surprising that the big banks are able to make record profits. We are in a huge refinance boom and they are borrowing money at 0% interest so the spread is in their favor. I’m not sure that this means the problems are over and we are going to see a return to profitability for most companies any time soon. If the stock market rally sputters again, more money will flow back into bonds.

The Fed continues to buy mortgage backed securities, which is keeping rates in a low range, but rates aren’t going much lower as long as the wholesale lenders continue pricing according to their pipelines, lowering rates when they need more loans, turning off the spigot when they have as much business as they can handle. With the new wave of loans coming from the new Home Affordable program, this is likely to put more pressure on the system and keep their pipelines filled. If you are starting a refinance now and are planning on locking in your rate, make sure to allow plenty of time to get the loan closed. This means at least 45 days (60 days if you want to subordinate a home equity or second mortgage). The other strategy is to float your rate and watch for an opportunity as the rates dip. We have been going back and forth in a range over the last several months. No one knows for sure what will happen to mortgage rates in the future, but so far it has worked well for borrowers who started the process, got their application moving and the appraisal ordered. This way when rates drop down near their low points, they can lock in for a shorter period of time. This puts more risk on the borrower, but it can payoff with lower rates. If you are in the market to purchase a new home in the Chicago area, be sure to allow a little more time, too. Purchases are given priority, but the process is taking a little longer for everyone.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates 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%     5.187% APR

15 Year fixed Rate           4.625%     4.724% APR

5-1 A.R.M.                          4.50%        4.701% APR

For Jumbo loans over $417,000

7-1 A.R.M.                         5.125%       5.279% APR

(For smaller Jumbo loans consider breaking your loan into 2 parts – conventional to the limit and a HELOC or second mortgage for the rest.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

With 1 point origination fee – 45 day lock

30 year fixed rate            4.75%      5.339% APR

With no origination fee – 45 day lock

30 year fixed rate            5.00%      5.523% APR

FHA APR reflects 3.5% 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 Mortgage Rates                   First time home buyer loans               

We Lend in All 50 States

There has been a lot of press recently about FHA loans and how the program has been under stress. At the end of February 7.46% of FHA insured loans were  in default or seriously delinquent. There has also been a sharp increase in FHA loans which go into default without the new owner making a single payment, a clear sign of fraud. These are ugly and eye popping numbers. Because of these statistics, I’ve heard commentators state that FHA is a broken program and that FHA is only picking up the worst loans, and setting itself up for failure. I’ve heard others say that FHA is like the sub prime loans of the past and we are making the same bad decisions now that got the mortgage market into a mess before. There is no question that FHA is under stress, but in my opinion it’s not because the standards are too low, the stress is a fact of life in the present economy.

FHA has always filled a need in the market. FHA is a federal program with a mission to increase home ownership for low and middle class families. FHA loans are fully underwritten and the emphasis is on whether the borrowers will be able to afford the home and make the payments in the future. The biggest obstacle to home ownership has always been saving up the down payment required to buy a home, and FHA offered the low down payment loans that made it possible for many first time home buyers to get in on the first rung of the home ownership ladder. FHA wasn’t a big part of the problems that got us into this mess. FHA had lost market share to low down payment conventional options every year up until last year, and was down to about 2% of the loans originated. But that was then, this is now. Conventional guidelines have tightened and price hits added to the point where many otherwise qualified buyers would pay so much more for a conventional loan that FHA is the only option. FHA loans now make up almost 40% of purchase loans. With more buyers who would have otherwise gone conventional forced into FHA, I am seeing more buyers with larger down payments and reserves than the typical cash strapped FHA buyer, and more buyers who have been home owners before, not just the typical first time home buyer. Rather than going down, the quality of FHA loans is actually going up.

With an explosion of new loans in a declining economy, it was a foregone conclusion that FHA would run into problems. But the truth is, this isn’t an FHA problem, it is a mortgage problem. Conventional loan delinquencies are at a record rate and Jumbo loans, which are above the conventional lending limit and made to buyers who are usually well to do, are now showing an increased rate of default. This is all linked to unemployment. As unemployment moves higher, more borrowers who were in good shape before will have trouble paying their loans, and that is exactly what has happened. The cities with the worst FHA default rates, Detroit, Elkhart Indiana and several cities in Florida, are all areas with high unemployment. As the economy recovers and unemployment goes down, this will take off the loan stress and bring the situation back to normal. The first payment defaults are more a result of the explosion in loan volume that FHA has seen. There have always been loan scammers and fraud involved in mortgages. Before it was concentrated in sub prime, now with so many more loans on the books, FHA is the target.

There have been a number of changes over the last year that take away some of the risk on the loans FHA insures:

• The minimum down payment has increased from 3.0% to 3.5%.
• Down Payment Assistance Programs, which were a way for the seller to fund the buyer’s down payment, are now gone.
• FHA cash out refinances have been decreased from 95% loan to value to a maximum cash out of 85%.
• The wholesale lenders have adopted minimum credit standards so that buyers will need at least a 600 credit score to qualify.

There is no doubt that more changes are on the way, and underwriting is likely to get tighter. But there are a lot of advantages to FHA and it is not a loan of last resort, but a loan that is the best option for many borrowers and many situations. These are some reasons you may want to consider FHA financing:

• Competitive rates and fees – FHA is comparably priced to conventional loans, and when you consider price hits, it is often priced better.
• It is the only option left for a low down payment purchase with a minimum investment of 3.5% of the purchase price.
• The entire down payment can come as a gift from a relative.
• With FHA approved condos and FHA spot loans, you can buy a condo at a good rate with a minimum down payment. With conventional guidelines you will need at least 10% down and there will be price hits if your down payment is less than 25%.
• To get the best pricing with a conventional loan you need a 740 credit score, and if your score is below 680 the price hits will make the conventional loan much more expensive.

FHA financing has gotten a bad rap lately, but without FHA as an option a whole lot less homes would be sold and less home buyers would be able to obtain financing.  FHA, along with all loan programs, will be under pressure and defaults are going to be a big problem until unemployment starts to fall. The home market is stressed now, but without FHA to pick up the slack left from tighter conventional guidelines, the housing market would be in even worse condition.

Illinois Mortgage Rates                   First time home buyer loans               

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Welcome to Illinois Mortgage Rates and News week in review for the week ending April 3rd, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

It always amazes me how quickly we can forget what we previously believed and swing our thinking over to a completely different way of looking at the world. The same thing happens with markets. Just a few short weeks ago the consensus view was all doom and gloom on the stock market. Stocks were low and headed lower. It was almost a sense of panic. Since then the economy has still had its share of bad news, and the overall outlook is not much different now than it was then. But the attitude now has completely shifted. The stock market is roaring upwards and commentators are convinced we are at the bottom of our downswing and ready to resume our upward climb. Over the last few weeks the news has been mixed. There have been some optimistic signs, but a lot of others which weren’t. But over the last four weeks the market ignored the bad news and saw only the good. Commentators who a few weeks ago were throwing up their hands and saying the sky was falling, are now insisting that the sky is the limit. This same attitude is now spreading to views on the overall economy, too. I’m hearing more people say that the worst is over and we are now starting to recover. Maybe.

The week started out with news that the Obama administration was firing GM CEO Rick Wagoner and threatening to let the company, along with Chrysler, slide into bankruptcy if they weren’t able to get their acts together and come up with a viable plan for survival. You can question whether the government is best equipped to make decisions about what is best for a private company (or why they haven’t made these same decisions with the big banks), but when these companies are effectively wards of the state, there isn’t much real choice. The bigger question is whether this is a serious threat, or just tough talk to make the next bail out go down easier. Even an orderly bankruptcy will spike the unemployment rate higher and send out ripples that will mean more jobs lost in all the companies that support the auto industry. With unemployment as high as it is, this would be a real blow. But letting the companies flounder along would just kick the problem down the road while keeping tax payers on the hook. So there is no easy decision either way.

Speaking of unemployment, The numbers for March were released on Friday and they came in right as expected with 663,000 lost jobs and a rise in the unemployment rate to 8.5%. These numbers are real bad on their own, but if you consider those who have given up looking and those who are working part time because they can’t find full time work, the number is much higher, 15.6%. This means that about one out of every six workers in America is now either out of work or underemployed. Unemployment is a lagging indicator and the economy will be well on its way to recovery before the rate comes down. But as the unemployment rate increases this means these families have less money to spend, and many who were able to make their housing payments before, may not be able to now.

There was some good economic news this week. Factory orders rose in February for the first time in six months, consumer spending was up slightly and at the G20 meetings in London world leaders pledged not to give in to protectionist impulses, which would hurt the world economy. One of the biggest stories this week was on an accounting standard that up until recently no one but accountants knew or cared about. One of the root causes of our economic troubles is that the big banks are under capitalized and not in a position to lend because of all the bad mortgage loans they have on their books. With the accounting standards as they are, the banks have had to value these assets based on what they would sell for now, when no one wants these loans. They have pushed for a relaxation of the mark to market rules saying they should have more flexibility in how they value these securities and that if they are able to hold them until a better time, the value would be much higher. Congress was pushing for this change, and the accounting standards board came through this week. This change instantly added equity to the big banks and made it less likely that they will participate in the PIPPs (Geitner bank plan) and will hold more of their toxic loans rather than unloading them now. It is possible that some of these bad loans will be worth much more after the market recovers, but it is also possible that this will just drag out the solution much longer. It strikes me as the equivalent of wallpapering your family room after your foundation has collapsed. It makes it look prettier, but it doesn’t address the real problems.

Mortgage rates rose this week. Bad news is good news for mortgage rates, and with money flowing into the stock market, treasury bills got killed and mortgage backed securities, which often go in the same direction as treasuries, also had a bad week. Rates are closer to the top of the range they have been in over the last several months, but we are still in the range. Rates rose, but not nearly by the amount they would in a normal market. The Fed has committed to buy mortgage backed securities in an effort to keep rates low and their purchases have made the mortgage market much steadier than it would otherwise be. Their calming influence will help to insure that rates remain affordable even when market sentiment is rushing in the other direction. We are still in record low territory, and I think the odds are that we will continue to go up and down in this range. If you are planning on refinancing your mortgage, this is a great time to lower your rate and make your payment more affordable. If you have an FHA mortgage, the FHA streamlined refinance is a way to lower your payment with out qualifying and without having to get a new appraisal.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates 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            5.125%     5.219% APR

15 Year fixed Rate           4.625%     4.724% APR

5-1 A.R.M.                          4.75%         4.843% APR

For Jumbo loans over $417,000

7-1 A.R.M.                         5.125%       5.279% APR

(For smaller Jumbo loans consider breaking your loan into 2 parts – conventional to the limit and a HELOC or second mortgage for the rest.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

With 1 point origination fee – 45 day lock

30 year fixed rate            4.875%      5.476% APR

With no origination fee – 45 day lock

30 year fixed rate            5.25%      5.523% APR

FHA APR reflects 3.5% 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 Mortgage Rates                   First time home buyer loans               

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With rates down near record lows, one of the most popular loan programs has been the FHA streamlined refinance. This is a way for anyone who has an FHA mortgage to lower their rate and lower their payment without going through all the qualifying they had to when they first got the loan. FHA is a government program, and the idea is that if you are able to make your payments on time with a higher rate, you will be in a better position with a lower rate, so they made qualifying as easy as possible. You don’t need to show any income or assets, the biggest credit issue is whether you are paying your mortgage on time (some lenders have established minimum credit scores), you can roll in most of your costs and in most cases you don’t even need to get a new appraisal. FHA is the biggest government loan program and FHA streamlines are very popular. But one of the best kept secrets in the mortgage business is that VA, the other big government loan, also has a streamlined program.

VA, or Veteran’s Administration loans, are available to qualified active duty and military veterans. The VA loan is one of the last true zero down options, and a great benefit for qualified veterans. The VA streamlined refinance program is called the Interest Rate Reduction VA Loan Program (IRRL) or VA to VA, and it is available for those who have already taken out a VA loan and are looking to lower their interest rate and payment with little or no money out of their pocket. Like the FHA streamline, you will need to show that you have made your payments on time over the last 12 months (no more than one 30 day late payment). This is an extension of the eligibility you used when you bought the home, and not a new use of your VA eligibility.

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

• No appraisal required.
• No application fee and no appraisal fee.
• No credit qualifying or job verification required.
• No mortgage insurance.
• There will be a half point (.5%) funding fee added into the loan – no funding fee for disabled Vets).
• You can roll in all the closing costs and pre-paids and up to 2 discount points (to bring the rate down) as well as up to $6,000 for energy efficiency improvements.
• This is available even if you no longer occupy the property, as long as you have occupied in the past.

Here is what you will need to get the loan started:

1. Your Certificate of Eligibility – or, with a copy of your DD214 discharge papers we can request your COE.
2. 2 forms of identification for anyone on the loan (Veteran and spouse) including your social security card or proof of your social security number.
3. A copy of your Note and HUD1 closing statement from when you bought the home.
4. A copy of your mortgage statement.
5. The name and phone number of your insurance agent.

The VA refinance is a great program for qualified veterans, and with rates near record lows, this could be the best time to refinance. If best time to refinance. If you are in a VA loan now and want to see how your payments could be reduced, give me a call and we can see how this will work for you.

Illinois Mortgage Rates                   First time home buyer loans               

We Lend in All 50 States