Welcome to Illinois Mortgage Rates and News week in review for the week ending August 7th, 2009, my take on the week’s financial news and how it affected Chicago Illinois mortgage rates.

Mortgage rates jumped again this week as more good news on the economy was released. The stock market is the highest it’s been since last October, and I’m wondering, was it really this easy? Less than a year ago the entire world financial system was on the brink of collapse. A new great depression was discussed as a real possibility and fear was so thick you could smell it. The government went on an unprecedented and massive spending spree, borrowing trillions to prop up our banks, pump cash into the system and stimulate the economy in an effort to avert a complete crash. The crash was avoided, but unemployment has surged and foreclosures are now commonplace in the best of neighborhoods. Over the past months as the threat of a worst case collapse lessened, the conventional wisdom was still that unemployment would continue to rise and any recovery would be slow and painful. But the news coming out now is so much better than expected. Was it really this easy?

There was a lot of data released this week, and while it was some what mixed, with rose colored glasses firmly in place, optimism on the economy ruled in the markets. Core inflation decreased this month, home sales were up for the fifth straight month and the ISM services index came in worse than expected, showing more expected weakness in the economy. But the Big Kahuna of economic indicators is always the monthly jobs report. Expectations were for job losses of around 340,000 in July, bad, but much better than the 600,000 plus we were seeing each month earlier in the year. The number came in much better at 247,000 jobs lost, and as a kicker, the unemployment rate dropped a tick to 9.4%.

The reaction to this news all plays into expectations. The jobs report if looked at on its own is still pretty bleak; it takes over 100,000 new jobs created each month to keep up with new people entering the work force. But this report was so much better than before, and employment is considered a lagging indicator (the recession is usually over before employment improves) so it is grounds for optimism. Right now, the markets are expecting a V shaped recovery. This means that a graph of the economy will look like a V with the economy recovering as quickly as it dropped. This is the market opinion now, but as you know, markets can be fickle. Most economists are still saying that other outcomes are more likely.

Some are looking at the worst case and saying that with our increased savings rate and decreased individual wealth, the economy has stopped its big drop, but there won’t be much of an increase any time soon. This scenario is a replay of what happened to Japan in the 90s, an L shaped economy where we would spend years bumping along the bottom. A U shaped recovery is a greater possibility. This means that we will bump along the bottom for a while, but over time we will move back up in a gradual recovery. Another likely bet is a W shaped recovery. If a V is forming now, this could be a set up for another drop later on. Government spending is still the only driver in the economy. Credit is still tight and consumers and businesses are not in a position to lead. Part of the upswing will be a result of inventory replenishment. When the big drop came at the end of last year, all businesses cut to the bone. Retailers stopped buying and manufacturers stopped making products. As inventory runs out, there will be an improvement in the economy based on reorders of the inventory, but if demand doesn’t increase quickly, this could quickly turn to another down turn. It will take some time to see which scenario plays out, but if you are following mortgage rates, volatility is super high, and this is a time to be cautious and lock your rate at the application.

In other mortgage related news, Taylor Bean & Whitaker, a wholesale lender that was one of the biggest sources for FHA loans for many smaller brokers, was cut off from FHA earlier this week, and officially went out of business the next day. That is bad news for any of the thousands of borrowers who had loans in the pipeline, whether directly from them or through one of the brokers who placed their loans with Taylor Bean. These borrowers will now have to start the process over, with their current lender or a new one, and the rates they locked in are gone. It has been quiet on the mortgage implosion front for quite a while, and this is a reminder that you need to know who you are dealing with, and some lenders are still very fragile. Fannie Mae also announced that they are running out of money and will need another government infusion soon. If you are a first time home buyer, remember, the $8,000 first time home buyer’s tax credit is only good through a close date of November 30^th . If you want to make it in time, you should get moving soon. Make sure you get your Chicago mortgage pre-approval so you are ready and able to meet the deadline.

So how did all this good news affect mortgage rates this week? 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              5.50%        5.678% APR

15 Year fixed Rate             4.875%        5.064% APR

5-1 A.R.M.                         4.375%        4.522% APR

 

For Jumbo loans over $417,000

30 Year Fixed Rate*          6.875%        7.093%

7-1 A.R.M.                        5.625%        5.729% 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              5.3755%      5.742% APR

With no origination fee – 45 day lock

30 year fixed rate              5.625%      5.739% 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            5.50%      5.748%  

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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