Cash strapped first time home buyers in Illinois just got another option for buying a home with almost no money down. IHDA, the Illinois Housing Development Authority, has now released a program which allows qualified first time home buyers to use part of their $8,000 first time home buyer tax credit upfront as part of their down payment on a new home. Coming up with a down payment has been the biggest obstacle for many potential home buyers, and this new program will allow up to $6,000 of the tax credit to be borrowed in advance and used as part of the 3.5% payment needed on an FHA loan.

There are some catches and limitations with the program. It isn’t a 0% down loan, the first time home buyer has to have at least 1% of their own funds invested (or $1,000, whichever is higher). There are also minimum credit score requirements of 660, income limits apply, the maximum debt ratio is 41% so you won’t be able to afford as much as with a straight FHA loan and home ownership education is required. The rate on this loan will be higher than you could get if you were able to come up with the down payment on your own (with FHA the entire down payment can be a gift from a relative), so if you have other options, this wouldn’t be the first choice. But if you do fit the situation, this is a way to buy now and take advantage of the first time home buyers tax credit before it goes away. We will be rolling this new program out some time next week.

Here are the program details, directly from IHDA:

The Illinois Home Start Loan Program

Home Start 30 year Fixed Rate Loan / Home Start Tax Credit Advance Loan

Purpose

To assist Illinois first-time homebuyers in need of down payment assistance, to access funds on a short-term basis in anticipation of the federal income tax credit for first-time homebuyers. This program helps borrowers take advantage of the $8,000 Federal Tax Program that expires November 30, 2009. Without this program, these borrowers would not be able to take advantage of historically low interest rates, along with home prices that have declined 20% to 40% in recent months.

First Mortgage Description

The first mortgage program will be a 30 year fixed rate amortizing loan insured by FHA. This loan can be used without the Tax Credit Advance loan. The loan will

be serviced by U.S. Bank Home Mortgage. Underwriting terms are listed below. The first mortgage program is designed to continue past November 30, 2009

based on market conditions.

Second Mortgage Description

The Tax Credit Advance Loan will be secured by a second mortgage on the home. The loan will not accrue interest for the initial period which is through June

30, 2010. An administrative fee of $300 will be charged. The Tax Credit Advance Loan will only be issued with an Illinois Home Start 30 year fixed rate loan.

Within the initial period, borrowers will file their tax return requesting their federal tax credit. This tax credit can be used to repay the tax advance loan. If the loan is not re-paid by June 30, 2010, then the remaining loan amount becomes a ten year amortizing loan at ½% above the rate on the Illinois Home Start 30 year loan, and the loan will be serviced by U.S. Bank Home Mortgage. This program is scheduled to end November 30, 2009. All loans must be closed by that date.

The Illinois Housing Development Authority reserves the right to terminate the program prior to the scheduled end date.

Program Requirements

Eligibility: Home Start 30 year – must qualify based on FHA loan guidelines as well as IHDA’s current program guidelines.

Tax Credit Advance Loan – must qualify and secure a Home Start 30 year mortgage.

2

Loan amount: Home Start 30 year - is based on IHDA’s program guidelines posted on the website: IHDA.org.

Tax Credit Advance Loan - 3.5% of purchase price with a maximum loan amount of $6,000. This loan is to be used towards the down payment.

Borrower’s investment: Borrower must contribute 1% of the purchase price to the transaction.

Exclusions: Other IHDA HOME Funds, Trust Fund assistance or other programs as deemed by IHDA may not be used in this transaction when securing a Tax Credit Advance Loan.

Occupancy: Property must be occupied as the borrowers’ primary residence within 60 days of closing. Borrower must maintain occupancy for the life of the loan. The IRS requires a rebate of the federal tax credit if residency is not maintained for 36 months.

Fee: Tax Credit Advance Loan - $300 paid at closing. This may be netted out of proceeds of the tax advance loan. $100 will be refunded if the loan is paid in full by June 30, 2010.

Loan Term: Tax Credit Advance Loan - 0% through June 30, 2010. If there is an unpaid balance at that date, it then becomes a ten year amortizing loan with a rate of the first mortgage plus ½%.

Eligible property: Existing 1 unit, single family properties.

Underwriting: Must include 2nd mortgage payment in total housing expense ratio. The income certifications and other required documents will be reviewed by the IHDA Compliance Officers.

FICO: 660 minimum

LTV: 96.5%

CLTV: 100%

3

Ratios: 41% Back-end debt to income ratio.

Purchase eligibility: Tax Credit Advance Loan – must close within 90 days of reservation or November 30, 2009, whichever is shorter.

Prepayment: The 2nd mortgage loan is due in full upon payoff or refinance of the first mortgage.

Mortgage Credit Not eligible with this program.

Certificates:

Servicing: U.S Bank Home Mortgage will service both loans.

Homebuyer Education: Homebuyer education is required prior to closing the loan.

If you have any questions on how this new program will work, 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 July 24th, 2009, my take on the week’s financial news and how it affected Chicago Illinois mortgage rates.

Mortgage interest rates are now almost entirely based on what is happening in the stock market. Money moves back and forth based on what investors think will be their best investments at that time, and like a herd on the western plains, the stampede in one direction can change to another direction at a moments notice. When the future looks bright and optimism is in bloom, money flows into the stock market and bonds (including mortgage bonds) suffer. When pessimism rules there is a flight to quality. Stocks dive and the fast money rushes into the safer investments like fixed income securities and mortgage backed securities. So as I’ve said before, bad news is good news for mortgage rates. Right now Wall Street is positively giddy with optimism. The stock market has surged through a level of resistance (on low volume, though) and mortgage bonds suffered. Mortgage rates were up slightly again for the week.

A big part of the stock market rise is due to better than expected earnings. This is good news, but like so much of this economy, the better than expected earnings don’t tell the whole story. Earning expectations have been steadily lowered as the economy sank, so when the companies numbers beat the street estimates, it was mostly because the hurdle was set extra low. Also, earnings for most of the companies reporting haven’t been a result of higher sales, but because they have reduced costs. Much of the reduced cost has been a result of layoffs and cutting back on purchasing and supplies. This may help their numbers in the short term, but what happens next quarter when they can’t reduce costs anymore? A lot of the betting now is based on the expectation that the economy will recover quickly (the V shaped graph) like a normal recession. A lot of economists are now saying that this won’t be the case, and an L shaped recovery where we bump along the bottom for a while is more likely. A fast recovery will be hard to achieve when consumers aren’t spending money and employment is still rising. The stock market may be getting ahead of itself and due for a fall, but if it keeps rising, mortgage rates are along for the ride (higher).

One source of optimism this week was the report that existing home sales have increased more than expected, and are now at an annual rate of 4.9 million homes sold. This compares to a bottom of 4.5 million (still a long way from the peak in 2005 of 7.5 million). More importantly, the amount of existing homes available for sale has dropped, and the inventory is now at a 9.4 month supply – the best level in a long time. This is good news, and a necessary step in the home market stabilizing. But this doesn’t tell the full story. These figures don’t account for all the shadow inventory of homes in default or foreclosure and not on the market yet. The inventory ratios also don’t count all the homeowners (and there are a lot of them) who want to move, but aren’t able or willing to with home prices the way they are now. If home prices start ticking higher, we will see a lot of new homes come on the market from these hopeful home sellers. This also doesn’t show that the market has divided based on price points. Homes that are in the lower price ranges are selling actively (especially to first time home buyers) and financing for these homes is readily available through FHA and conventional mortgages. Higher priced homes are a different story. The Jumbo loan market has never recovered, so financing is more expensive and harder to find, and because so much of the market at the lower price levels is made up of foreclosures and short sales, there aren’t as many move up buyers to buy the higher priced homes.

On the other hand, real estate is local, and some areas are doing quite well while others are still declining. The $8,000 first time home buyer’s tax credit is bringing in a lot of first time home buyers, and with the deadline of November 30^th approaching, sales are likely to increase steadily over the coming months. Longer term, population continues to increase even as new home starts grind to a halt. With supply constant and demand increasing, prices will start to rise again within the next few years. This article (hat tip to The Big Picture) makes a great case for the housing market bottoming out sooner than many may think. The wild card is still the high level of unemployment. High unemployment means more foreclosures yet to come, so supply will continue to increase for some time. But real estate is and always has been a long term investment. If you are buying for the long term this should be a great time to buy.

If you are looking to buy your first home, make sure you allow enough time to take advantage of the. The credit expires after November 30th of this year. If you are thinking of buying this year, make sure you get your Chicago mortgage pre-approval so you are ready and able to meet the deadline.

Here are the current Illinois Home mortgage rates 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              5.375%     5.562% APR

15 Year fixed Rate             4.75%       4.884% APR

5-1 A.R.M.                         4.25%        4.328% APR

For Jumbo loans over $417,000

30 Year Fixed Rate*          6.875%       7.126%

7-1 A.R.M.                        5.50%        5.683% APR

(Another option is to break your Jumbo loan into 2 parts – conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

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

With 1 point origination fee – 45 day lock

30 year fixed rate              5.25%      5.738% APR

With no origination fee – 45 day lock

30 year fixed rate              5.50%      5.729% APR

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

VA Veterans Administration 0 Down Loans

With 1 point origination fee – 45 day lock

30 Year Fixed Rate            5.25%      5.548%  

Call for information on no-cost VA Streamlined Refinances

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

If you are in the market to buy or refinance a home, having a good credit rating is more important now than ever before. Both conventional and FHA loans now use credit based scoring (where better credit scores get better rates) or credit floors (below which your loan is automatically rejected). This means a few points difference in a score can mean a difference of thousands of dollars over the years you hold onto the mortgage, or if you are even able to get the house at all. Credit scores are crucial to the loan process, but the truth is that the whole system is flawed. There are hundreds of factors which go into each credit score and credit scores change constantly. Like taking a snapshot, your credit score measures only what is happening in that moment in time. Some of the scoring items are contradictory and some are entirely illogical. You could have a perfect credit rating and never paid a bill late and still have a sub par score. Little changes can make a big difference in your scores, and with so much riding on them you need to do what you can to present your credit profile in a way that presents you in the best light. If you have time there are a lot of things you can do to improve your credit scores, but if you are on the borderline and pressed for time, there are still ways to get your credit scores up.

For a full run down on how credit works and what you can do to raise your scores, read my 4 part series:

Part 1 -How credit works

Part 2 – Fico scores and how they are figured

Part 3 – 10 Ways to raise your FICO scores

Part 4 – Fixing mistakes and credit repair

This series is a great primer on what will work to make the most of your credit scores, but this is general advice, not specific to your personal situation. If you are in the market for a home and need to get your score up 20 points in order to qualify (minimum 600 score for FHA) or to avoid paying extra (below 740 on a conventional loan) you want something that will make the difference now. One way to do this is by using a “What if?” credit simulator. This is a tool we have available through one of our credit companies. When we pull a credit report the report will tell us not only what the scores are now, but what the range can be in potential improvements. Then we can use the “What if?” simulator to try out different changes to see what will make the most positive impact in your score. Maybe paying down a credit card, or switching a balance to another lender will help. It could be a matter of adding a balance to a card you haven’t used in a while or fixing a mistake on your report. Little changes can make a big difference, and this tool takes the guess work out of the credit equation.

There are two ways we can use this tool. First, if you haven’t found a home yet, we do this as part of the pre-approval and this tells you what you need to do while you still have time to do it. It takes about a month for the credit companies to report. If you have the time make the changes now and your scores will be up when you are ready to apply for the loan. The second way to use this is if you are already at the point where you need the loan and don’t have time to wait. In this case you can do a rapid re-score and we can update the credit on the items you changed manually. This is more expensive as the credit company charges for every credit line that is updated, but paying a little more up-front can pay off big if you are able to get a better rate. Or an approval you wouldn’t other wise get.

The “What if?” simulator is a great tool, and it does work. But don’t wait till the last minute to run your credit, get pre-approved before you start looking for a home. If you want to see what can be done to make the most of your credit, give me a call or click here for a pre-approval. I’d love to help.

Illinois Mortgage Rates                   First time home buyer loans  

We Lend in All 50 States

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

Watching the markets can be like Chicago weather, if you don’t like it now, wait a minute and it will change. Markets are always shifting, but usually within a bigger perspective of what the future holds. Prices can go down in a Bull market, but the lower prices just bring in more buyers looking for bargains. Up drafts in a Bear market allow the smart sellers to unload stock to the suckers who think that the market has really shifted for the positive. The problem of course is that you don’t know what kind of a market you are in until later when the market has either moved up higher or down lower. Over the last 2 years we have been in a bad bear market for stocks, but prices have moved higher recently, and with more and more signs that the worst is over, the stock market has been on a tear. Good news for stocks means bad news for bonds (and mortgage rates), and as money flows into stocks, interest rates move higher. But like the Chicago weather, don’t get too complacent, because change may be right around the corner. Mortgage rates went up again this week, but there are signs that point in both directions, and in a traders market like this rates are just as likely to go down as up. At this point no one knows whether this is a pause in the long term bear market or a real turning point. Mortgage rates are moving largely based on what happens in the stock market, and with uncertainty ruling, rates are even more volatile than normal.

There are some signs that the economy is getting better, but each of these messages were mixed. Retail sales were up this week, and some looked at this as a sign that consumers are starting to spend money again. A closer look shows that a big part of the increase was due to higher gas prices, not more buyer enthusiasm. New home starts picked up on a month to month basis, and again, this was looked at as another sign that the economy was turning positive. But the other side to this coin was that the pick up was from a very low level, and if you compared the number of home starts last month to what happened a year ago, the number was off 46%. Nouriel Roubini, commonly referred to as Dr. Doom because of his grim economic predictions, one of the few who has been right about the economy all along, made news this week when he was quoted as saying that the worst of the recession was now over. The stock market looked at this as more reason for exuberance and this helped stocks move another leg higher. Later, Roubini responded to the report and said his words were taken out of context. He does think we are through the very worst of the down turn, but he thinks we won’t see any improvement until the end of the year, and when we do, any improvement will be weak and the recovery will be subpar. In the same vein, initial jobless claims were better than expected, but still over 500,000, and the total number of those unemployed is at record levels.

I n other economic news, the FOMC (Federal Open Market Committee) released the minutes of its last meeting. There were no surprises and this was pretty much a nonevent. Goldman Sachs released record profits this week, and massive bonuses will be paid as a result. GS benefitted hugely from all the bailouts and all the money pumped into the economy over the last year. It is kind of obscene to see them making so much now without changing the risky way they do business. Another long term indicator that points to more trouble down the road, is that both federal and state tax revenue have dropped off a cliff. The Feds are dealing with this by borrowing more and printing more money. Most states have constitutions which require that they operate with a balanced budget. This means cuts in services (layoffs and less spending) and higher taxes. Neither is good for the long term health of the economy.

Mortgage rates got worse on four out of the five days this week, but again, volatility is the rule. With no clear direction traders are buying and selling based on technical indicators. The stock market is now bumping up against a layer of resistance which is looked at as a major technical barrier. If stocks rise and the market breaks through this barrier (because the economy is looking rosy), expect mortgage rates to get worse quickly. The opposite is just as likely though. If the stock market bumps against this barrier then bounces back and heads lower, mortgage rates could get better just as quickly. But as long as there is no clear direction these gains or losses are just traders playing the market.

If you are looking to buy your first home, make sure you allow enough time to take advantage of the $8,000 first time home buyer’s tax credit. The credit expires after November 30th of this year. If you are thinking of buying this year, make sure you get your Chicago mortgage pre-approval so you are ready and able to meet the deadline.

Here are the current Illinois Home mortgage rates 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              5.25%     5.387% APR

15 Year fixed Rate             4.75%       4.884% APR

5-1 A.R.M.                         4.25%        4.328% APR

For Jumbo loans over $417,000

30 Year Fixed Rate*          6.875%       7.126%

7-1 A.R.M.                        5.50%        5.683% APR

(Another option is to break your Jumbo loan into 2 parts – conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

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

With 1 point origination fee – 45 day lock

30 year fixed rate              5.25%      5.738% APR

With no origination fee – 45 day lock

30 year fixed rate              5.50%      5.729% APR

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

VA Veterans Administration 0 Down Loans

With 1 point origination fee – 45 day lock

30 Year Fixed Rate            5.25%      5.548%  

Call for information on no-cost VA Streamlined Refinances

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

I received a call from the Chicago Tribune the other day asking an excellent question – Is there still a lot of time left for the $8,000 first time home buyer tax  credit? Or to put it another way, is it time to panic yet? The answer is no, it’s not time to panic, and there is still plenty of time for Chicago area first time home buyers to find a home and close on it before the November 30th deadline comes around. But just as summer disappears before we realize it, you can bet that the deadline for the tax credit will be here sooner than you think. This means that some procrastinators will be caught in a squeeze, and there will be a rush to get the last minute closings in under the wire. Real estate deals can take time to come together and close in the best of times, and there are always little things (and sometimes bigger things) which come up and add to the transaction time. A little longer closing time in August is an inconvenience. If the same thing happens in November it could cost you $8,000.

The biggest part of the housing market in the Chicago area this year has been made up of first time home buyers. Low home prices and low mortgage rates have been big incentives, but the icing on the cake has been the first time home buyers tax credit. Most first time home buyers are now buying with FHA financing, which means a minimum payment of just 3.5% of the purchase price. So if you were to buy a $300,000 home, after the close you could amend your tax return and get more back from the tax credit than what was invested in the down payment. Not a bad deal at all. Up until now there hasn’t been a sense of urgency to buy. We are in a buyers market, and with so many good properties available, if one doesn’t work out another will. But if you are a first time home buyer, and if that tax credit is part of your motivation, there are some real reasons why you need to step things up.

Here are some reasons that the whole process might take longer than you expect:

1. It takes time to find the right house. Buying a home is an emotional decision. This is more than just a place to live, it is an extension of who you are. I hear it all the time and it was the same when we bought our houses, you know the house is right for you when you first see it. Waiting until the ‘last minute’ means you are more likely to settle for what is acceptable, rather than what you really want.

2. Foreclosure and short sale properties take longer. In the Chicago area, over 40% of the sales have been short sale or bank owned properties. With these homes the bank is making the final decision as to whether to take your offer, or not. You can get some great deals with these homes, but don’t expect to close fast. Banks have become quicker and more responsive over the last year, but it can still take 30 days or longer before you even get an answer back on a purchase offer.

3. Condos can take longer to approve. Condos are the home of choice for many first time home buyers because they fit the lifestyle best. But condo financing has tightened up considerably over the last few years, and now it is a matter of not only approving you for a loan, but making sure that the condo building conforms to all the new rules and regulations. Gathering the information takes time, and the home owners association or management company needs to provide the information, and they are more likely to do this on their time schedule than yours. The bottom line is that if you are looking at buying a condo, try and do the research to make sure it fits the guidelines up front (your Realtor and lender can help with this), and allow a little extra time.

4. Appraisals can take more time. The new HVCC appraisal guidelines make the appraisal process more complicated for all mortgage lenders, but for many, including mortgage brokers and some of the big banks, this has meant that appraisals now take longer too. I’ve heard from a lot of buyers who were still waiting for the appraisal 30 days into the process and were concerned that they wouldn’t close in time. Make sure you talk with your lender early in the process and ask how long the appraisal will take so you aren’t surprised as you get near the dead line.

5. Financing can take extra time. It wasn’t that long ago that we were in the midst of a refinance boom and mortgage turn times were out of control. A lot of lenders are still out of control. A lot of companies have staffed up so this isn’t a problem now, but if rates come down again and the first time buyer boom hits a peak at the same time, approval and closing times could stretch out again.

6. Unexpected problems can occur. So much of the real estate transaction is out of your control, and there can be problems and delays that no one foresees. This can be a matter of a title issue which needs to be cleared, a seller who won’t let the appraiser in to see the property, or one hundred other possibilities. In a case I ran into last week, the buyers got to the closing ready to close, but the sellers needed to bring cash to the closing and they didn’t have it. This one did close, but it wasn’t quick and it wasn’t pretty. Most of these problems can be worked out, but if you are on a deadline, they might not be worked out in time to help you.

You can’t control the entire home buying process and it always makes sense to be proactive rather than waiting until the last minute. But there are some things you can do to put yourself in the best position so you can buy your home with more control and make sure you get what is best for you:

• Get pre-approved for a mortgage – Mortgage pre-approval is not only easy and relatively pain free, but it is the first step toward buying a home, and most Realtors won’t even work with you unless they know you will be able to buy. Getting your pre-approval upfront means you know what you can afford, and more importantly, if there are any problems you have time to deal with them. You can start the whole process with a short phone call and if you are serious about buying there is no excuse for putting it off. If you want to go over your situation quickly and with no obligation, give me a call.
• Get your down payment together – Finding the down payment is the biggest obstacle for most first time home buyers. FHA allows a 3.5% down payment and this can all be from a gift. There was talk about finding a way to use the tax credit up-front as part of the down payment, but the way it set you will need to come up with your down payment first and you can get the tax credit after the closing (by filing an amended 2008 tax return). Here is a list of ways to come up with your down payment.
• Find a good Realtor – I’m always amazed at how many people try and find a home by themselves without using a Realtor. The seller pays the commission, but you will get the benefit of the Realtor’s experience. There are hundreds of sites you can go to and search the MLS for properties. But there is a big difference between what you see on the Internet and how the home will work for you in real life. You want someone who is an expert in the neighborhoods you are looking at and has the experience to help make the transaction go smoothly.
• Start looking – You will need to look at a lot of homes to find the one that’s right for you. Get off the computer and get into the car. It’s the only way you will find your home.

Lastly, don’t wait till the last minute. If you do your homework and get going now you will be able relax and enjoy your new home as the calendar flips into December, and with $8,000 extra cash in your pocket you will feel a whole lot better.

Illinois Mortgage Rates                   First time home buyer loans  

We Lend in All 50 States

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

Strike up the band, happy days are here again. Well, maybe not. The economy isn’t improving, in fact the consensus is coming back to the view that the economy is still stagnant. But as I’ve said many a time here, bad news in the economy is good news for mortgage rates. Mortgage rates have nearly come full circle and we are at the outer edges of the low range we were in before the bond market tanked last month with the view that the worst was over for the economy and an impressive rebound was on the horizon. The view is still that we’ve seen the worst of the downturn, but the new reality is that there isn’t going to be much of a bounce any time soon. And that means lower rates are back in the picture. This means another opportunity for those who missed out on the low rates before. I’m now seeing more home buyers lock into their rates, and a pick up in refinances again.

Mortgage rates have been heading back down over the last few weeks, but the news this week kicked that trend into overdrive. The University of Michigan consumer sentiment survey fell sharply this week from 70.8 to 64.6. If consumers are feeling pessimistic, this means they won’t be in the mood to buy, and with consumer spending the biggest driver in the economy that’s not good news. Confirming this trend, retail sales were down 4.9% in June. But the biggest factor in rates moving lower was the good results on Wednesday from the 10 year Treasury Bond auction. With all the new government spending, both now and in the future, as a result of the stimulus plan, the mortgage bond purchasing program and a whole new round of spending, the government has had to raise money through issuing new debt. New debt is always a worry because it has to be paid off at some time. The concern has been that this run up in debt will cause the dollar to fall further and inflation to heat up. This auction was more important than others because the 10 year note is the closest approximation to a 30 year mortgage, and a good gauge of long term rates. The auction went way better than expected. The yield dropped from last month’s 4.0% to 3.30%. This means that bond investors are now expecting that long term rates are likely to remain low. Mortgage backed securities (which mortgage rates are priced off of) rallied, and mortgage rates fell. At the same time, oil rates fell on the world market this week, meaning less inflation. Mortgage rates have improved this week, but what happens next depends on what happens in the stock market. If the stock market falls there will be a flight to quality (bonds) and mortgage rates will fall back to their lows.

We are in the middle of Summer, but if you are a first time home buyer, you need to know that the seasons are changing and Winter will be here before you know it. The $8,000 first time home buyer’s tax credit expires after November 31^st of this year, so if you are in the market for a home and fit the criteria for the credit, make sure you allow enough time to buy and close before the expiration date. This is especially true if you are looking at foreclosure and short sale properties which can take more time to close. The clock is ticking. If you are thinking of buying this year, make sure you get your Chicago mortgage pre-approval so you are ready and able to meet the deadline.

Here are the current Illinois Home mortgage rates 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%     5.276% APR

15 Year fixed Rate             4.625%      4.744% APR

5-1 A.R.M.                         4.25%        4.328% APR

For Jumbo loans over $417,000

30 Year Fixed Rate*          6.75%       6.897%

7-1 A.R.M.                        5.375%       5.453% 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              5.00%      5.579% APR

With no origination fee – 45 day lock

30 year fixed rate              5.25%      5.568% APR

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

VA Veterans Administration 0 Down Loans

With 1 point origination fee – 45 day lock

30 Year Fixed Rate            5.00%      5.248%  

Call for information on no-cost VA Streamlined Refinances

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

To paraphrase baseball’s greatest philosopher, Yogi Berra, it’s looking like déjà vu all over again. For most of this year mortgage rates have hovered in a range near their lowest levels of the last 40 years. Rates were so low because the economy was in free fall, and the Fed had made it its stated mission to keep mortgage rates low to stabilize the real estate market. After announcing that they would continue to buy mortgage backed securities (with a budget of 1.25 trillion dollars) the normally volatile mortgage rates market settled into a pattern so dull and boring that the rates became predictable. This range lasted for months, but all good things must come to an end, and as June came in the market swooned. Markets are ruled by emotion, and the fear of economic collapse was now gone, but the fear of inflation (from printing new money to pay for all the new spending) took hold. There was talk of green shoots, and many market participants thought the economy was about to rebound quickly. The stock market surged, and mortgage rates went up nearly a full point from their low to the high point. Mortgage refinances stopped over night, and while the purchase market kept on going, higher rates cut down on the purchasing power of many first time home buyers. But, déjà vu, we are now coming right back to where we were before the market tanked and rates are dropping again.

The consensus thinking is now back to an outlook that the economy has stopped its free fall, but there are no signs of a quick recovery. Unemployment is still spiking higher, and with massive loss of wealth (home values and the stock market) inflation has no way to take root. That means the bias is back toward lower mortgage rates. That doesn’t mean rates will continue to drop, and it certainly doesn’t mean that we are back into the calm period we were before (after yesterday’s huge bond market rally the market is off today, meaning slightly higher rates for this morning). But the trend has changed, and rates are now back near their lows again. If you were thinking of refinancing before but didn’t pull the trigger, or if you have been thinking of buying a new home, this could be a good reason to get off the fence now. Rates are low again, but the June move up reminds us that these low rates won’t last forever. Take advantage of them while you can.

Illinois Mortgage Rates                   First time home buyer loans  

We Lend in All 50 States

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

The news released this week continues the trend back toward lower rates, but gave more proof that the economy is bottoming out and the worst of the slide is over. There weren’t a lot of fireworks in the market since so many traders were taking the week off. On the good side, May factory orders ticked up 1.2% and the ISM index, a survey of purchasing managers throughout the country, showed an increase, suggesting more companies are running low on inventories and reordering. The Case Schiller index gave more evidence that housing is forming a bottom. Home prices are still going down, but at a much slower pace than before. On the downside, consumer confidence took a tumble again, falling another five points to 49.3. This is important because if consumers don’t feel confident they won’t spend money and it will be hard for the economy to recover.

The biggest market mover this week, as is usually the case, was the release of the unemployment report. This is always the most anticipated report of the month and this was no exception. Last month the numbers were much better than expected, and if they came in the same range this month it would be confirmation that the economy was rebounding. Didn’t happen. The report came in at 467,000 jobs lost in June, 100,000 worse than expected, and the worst rate in 26 years. This is better than the 600+ range we were seeing earlier in the year, but it is along way from stabilizing let alone recovery. This news sent the stock markets lower, and helped bond rates move lower. Because this was a Holiday shortened week where volume was low, mortgage rates didn’t benefit as much as they otherwise might have. But odds are good that we will see some improvement in pricing next week.

The purchase market is still alive and well as a result of low prices, still affordable mortgage rates and the $8,000 first time home buyer’s tax credit. The tax credit is a big incentive to buy now, and it only applies for those purchases that close before December 1^st of this year. If you are in the market for a home and fit the criteria for the credit, make sure you allow enough time to buy and close before the expiration date. The clock is ticking. Here are the current Illinois Home mortgage rates 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              5.25%     5.397% APR

15 Year fixed Rate             4.75%      4.848% APR

5-1 A.R.M.                         4.50%        4.672% APR

For Jumbo loans over $417,000

30 Year Fixed Rate*          6.75%       6.897%

7-1 A.R.M.                        5.375%       5.453% 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              5.25%      5.879% APR

With no origination fee – 45 day lock

30 year fixed rate              5.50%      5.863% APR

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

VA Veterans Administration 0 Down Loans

With 1 point origination fee – 45 day lock

30 Year Fixed Rate            5.00%      5.248%  

Call for information on no-cost VA Streamlined Refinances

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.

Happy 4th of July!

Illinois Mortgage Rates                   First time home buyer loans  

We Lend in All 50 States

With an upcoming change, FHA will be able to finance a lot more condominiums here in the Chicago area and throughout the nation. A recent FHA mortgagee letter detailed the new process that will streamline condo project approval and will open up a lot of properties which up until now have not been eligible for FHA financing. Over the last 2 years condo financing has become increasingly harder with tightening guidelines, restrictive mortgage insurance policies and loan level price adjustments which made condo financing much more expensive for anyone without a big down payment. Over the last 10 years almost all the condos in Chicago were financed with conventional loans and as more and more condo units came on the market through new construction or conversions from rental units, few of these properties applied for FHA project approval. The bright spot for many lower down payment condo buyers was the FHA spot loan. The FHA spot loan approval process allowed home buyers a way to buy units in condo buildings that weren’t FHA approved with the better terms that FHA offered (including competitive rates and a low 3.5% down payment), as long as the building met certain guidelines. This has been a great program, and it has helped a lot of new buyers, but there were a lot of otherwise well managed properties which have been excluded from this program. With the new changes, set to take place on October 1^st, some of the problems in the program will be fixed and more condo units will now be available for FHA financing.

The FHA spot approval was a great program, but there were some glitches:

• Any property which had a “right of first refusal” in its Decs and By-laws was automatically rejected.
• Because of rules regulating how many units in a project could be FHA funded, the condo project had to have at least 5 units. This meant that all the smaller condo units, including a lot of 2 and 3 unit buildings which were converted over to condos during the housing boom, were not eligible for spot loans.
• The project had to be 90% sold out, meaning only well established properties were eligible, and more recent conversions or new construction condo would not be able to be approved.
• The spot loan was for a single unit only. If someone else bought in the same building after a spot loan had been approved, they had to go through the same process again.

The new FHA condo approval process changes each of these, meaning more properties will fit the terms and be able to qualify for FHA financing. As of October 1^st FHA will do away with the spot approval process and begin the new process. Under the new terms, properties won’t be restricted if they have the first right of refusal in their condo docs as long as they don’t discriminate, buildings with 2 units and up will be eligible, newer properties will work once they are 51% sold. The approval is not for the individual unit but the project itself, so once approved other units will then be eligible for FHA financing up to maximum concentrations (1 FHA financed unit in buildings of 3 units or less, and up to 30% FHA financed in larger buildings).

One big change in the guidelines is that going forward the approvals will be handled by only FHA direct endorsement lenders (my company is FHA direct endorsed) with “staff knowledge and expertise in reviewing and approving condominium projects”. This means that the lender will be responsible for collecting all the documentation needed and putting together the full project approval. This means more paperwork and responsibility for the lender (though this is similar to what is needed for many conventional approvals now), but once the approval is complete the project will be added to the FHA approval list and then any FHA lender or broker will be able to do loans in the building. The company I work for is gearing up for this program by hiring a condo specialist who will work with our underwriters and processors to get these approvals out as quickly and smoothly as possible. I think this will be a big help to the market and will give buyers a lot more selection to choose from.

Here are some of the particulars of the new process taken directly from the mortgagee letter The new rules go into effect on October 1^st 2009:

• Projects consist of two units or more.
• Projects must be covered by hazard and liability insurance and, when applicable, flood insurance.
• Right of first refusal is permitted unless it violates discriminatory conduct under the Fair Housing Act regulation in 24 CFR 100.
• No more than 25 percent of the property’s total floor area in a project can be used for commercial purposes. The commercial portion of the project must be of a nature that is homogenous with residential use, which is free of adverse conditions to the occupants of the individual condominium units.
• No more than 10 percent of the units may be owned by one investor. This will apply to developers/builders that subsequently rent vacant and unsold units. For two and three unit condominium projects, no single entity may own more than one unit within the project; all units, common elements, and facilities within the project must be 100 percent complete; and only one unit can be conveyed to non-owner occupants.
• No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment.
• At least 50 percent of the total units must be sold prior to endorsement of any mortgage on a unit. Valid presales include an executed sales agreement and evidence that a lender is willing to make the loan.[1]
• At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units.[2] For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units (the minimum presales requirement of 50 percent still applies).
• Legal Phasing is permitted for condominium processing. It is recommended that developers submit all known phases for initial project approval. For purposes of calculating the owner-occupancy percentage:
• a. On multi-phased projects the owner-occupancy percentage is calculated on the first declared phase and cumulatively on subsequent phases if the ownership of the condominium project
• b. remains the same;
• c. If multi-phasing includes separate ownership per phase, each phase is calculated individually; or
• d. Single-phase condominium project approval requests must meet the owner-occupancy percentage requirement.
• · FHA Concentration
• a. Projects consisting of three or less units will have no more than one unit encumbered with FHA insurance.
• b. Projects consisting of four or more units will have no more than 30 percent of the total units encumbered with FHA insurance.
• · Reserve Study – a current reserve study must be performed to assure that adequate funds are available for the funding of capital expenditures and maintenance. A current reserve study must be no more than 12 months old – if recent events or market conditions have affected the finished condition of the property that information must be included. When reviewing the reserve study, consideration must be given to items that have been replaced after the time that the reserve study was completed.

Illinois Mortgage Rates                   First time home buyer loans  

We Lend in All 50 States