Welcome to Illinois Mortgage Rates and News week in review for the week ending August 14th, 2009, my take on the week’s financial news and how it affected Chicago Illinois mortgage rates.

What a difference a week can make. Last week signs of a rebound in the economy were everywhere. The conventional wisdom was that the economy was not only over the worst of the down turn, but on the cusp of a strong upswing. This week the message was slow down, we might not be done with this mess yet. In a week with lots of data, a Fed meeting and 3 treasury auctions bringing about $75 billion of new bonds on the market (which is generally bad for mortgage rates) the mortgage market rallied and mortgage rates dropped sharply. Over the last several months, since May when rates jumped out of their all time low range, mortgage rates have moved up and down in a broad pattern. We are now approaching the best part of that range. If recent history is a guide, this coming week will be a good time to lock in a loan if you are in the market for financing.

As usual, the economic reports were somewhat mixed. The Reuters/ University of Michigan Consumer Confidence survey came in low again for the second month in a row. Consumer spending has traditionally been the biggest engine of growth in the economy. If consumer confidence is low, this means consumers aren’t in a position to spend us out of this recession. Retail sales also came in much worse than expected. Total sales dropped by .1% for the month, but this was at the same time that the Cash for Clunkers program was goosing auto sales through the roof. Analysts expected an increase of .8% for the month, but sales of everything but autos was so low that we saw a slight decrease instead. The weekly labor report was weak again, but on the good side, productivity came in strong. Though part of this was a result of businesses cutting employment to the bone and getting by on less. Better news was that there are still no signs of inflation. The consumer Price Index came in flat, and prices have fallen over 2% from last year.

The Fed Open Market Committee met on Tuesday and Wednesday and issued their statement of policy at the close of the meeting. Fed statements are always dissected for hidden meanings and hints at future policy. This statement was no exception, and the take away for most reporters was the phrase “economic activity is leveling out. Conditions in financial markets have improved further in recent weeks.” This is obviously much better than it has been, but the rest of the statement doesn’t hint that they expect a fast recovery. The best news from a mortgage standpoint is the phrase “the Committee expects that inflation will remain subdued for some time.” Mortgage rates react to the threat of inflation, so this expectation should keep a lid on mortgage interest rates for an extended time.

The Treasury auctions also went well this week. With the big increases in government spending, these auctions are becoming a standard occurrence. One good sign this week was the high amount of foreign buyers at the auctions. If the rest of the world still wants to buy our debt, we are still in good shape for the future. The stock market is another major factor in mortgage rate volatility. With optimism on the economy strong, stocks have been flying. But stocks faltered this week, and if this consensus continues to change, and investors start focusing on how long the recovery will take and how robust it will be rather than how much better we are now than we were last October (is the glass half empty instead of half full), money will flow out of stocks and bonds will benefit. This could mean lower mortgage rates if stocks do drop.

In the real estate market, August is usually one of the slowest months of the year. We are in the dog days of summer, and this is the time when people are taking last minute vacations, getting their kids ready for school and just enjoying the end of summer, because it is too hot to go around looking at houses. But this august is different. First time home buyers are out in force, making offers and getting pre-approved for a mortgage, so they have time to buy and close on a home before the November 30^th deadline of the $8,000 first time home buyer’s tax credit. It isn’t too late to start, but November will be here sooner than we think. It takes time to find a home, process and close a loan, and I expect a flood of new applications as we get closer to the date. 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              5.25%        5.382% APR

15 Year fixed Rate             4. 75%         4.883% APR

5-1 A.R.M.                         4.125%        4.342% APR

For Jumbo loans over $417,000

***************** SPECIAL JUMBO PRICING ****************

30 Year Fixed Rate*          5.875%        6.093%*

This 30 year fixed Jumbo is special pricing based on a purchase up to 75% LTV or a refinance to 70%, 680 or better Fico scores. Other restrictions may apply.

**************************************************************

7-1 A.R.M.                        5.50%         5.637% 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              5.00%       5.522% APR

With no origination fee – 45 day lock

30 year fixed rate              5.375%      5.529% 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            5.125%      5.327%  

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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