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.

 

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