Welcome to Illinois Mortgage Rates and News week in review for the week ending August 21st, 2009, my take on the week’s financial news and how it affected Chicago Illinois mortgage rates.

All summer long the mortgage market has been range bound. The pattern has been two steps forward, one step back, then one step forward, two steps back. That’s the mortgage rate shuffle. This week rates improved over most of the week before getting slaughtered on Friday. That is one of the key elements of the mortgage rate shuffle, the direction changes on Friday. What this means to you as a consumer, is that the news effects mortgage rates on a day to day basis, but right now the bigger picture is that mortgage rates are more influenced by the price levels of Mortgage Backed Securities, and the traders are watching the range and selling as prices get high, and buying when they reach the cheaper end of the range. At some point something will happen, and rates will break out of this range, but for now, if you are in the market for a mortgage, there is a time to lock and a time to float. Even with the sell off on Friday, mortgage rates are near the best part of the range. This could be a great time to lock in your rate.

One of the biggest news items this week was the greater than expected increase in home sales. With home prices down, low mortgage rates and the $8,000 first time home buyer’s tax credit, the real estate market has come back to life. Existing home sales rose 7.2% nationwide in July from the month before, and actually increased 5% on a year over year basis. This is great news, and the coverage of this release showed this as evidence that the real estate market had hit bottom and was now rebounding. I think this is an excellent time to buy, especially for those who can take advantage of the tax credit, but the news isn’t all sunny. The median sales price in the Chicago area was down 16% from last year for a median price of $213,000. This reflects two things. One, prices have fallen and a big part of this is because foreclosure and short sale properties are the biggest part of the market now. The NAR says that 31% of the sales last month were distressed, other sources show the percentage as much higher. The second thing this figure shows is that most of the activity is in the lower price ranges. The tax credit counts for part of this, but with so many of the homes sold being distressed, this means no move up buyers rather than the chain of transactions that are set off in a more traditional real estate market. These sales do help reduce inventory, which is necessary for any kind of true rebound, but inventory of homes for sale is still around 11 months, and with unemployment high foreclosures and short sales will continue to grow. Buying now makes sense and bargains abound, but you need to plan on staying in the home long term, because the market isn’t going to shift overnight.

Fed Chairman Bernanke also made news on Friday when he said that we have survived the worst of the down turn and prospects for growth are good. He said that the Fed’s response to the financial crisis last year (pulling out all stops to get more money and credit moving in the system) “saved the world” (I agree with him on that point) and that we are now on that we are now on the verge of recovery. The stock market surged again on these words, down playing the rest of the message, that credit is still tight and difficult times lie ahead. Stock prices are now at their highest point over the last year. Oil prices also hit their high for the year Friday, closing at just under $74 per barrel. This looks a lot like Déjà Vu to me. Last year we saw a huge run up in oil prices, up to $140 per barrel, which crested at the end of the summer and then fell like a stone. At the time, inflation was the big concern and there was talk that oil would hit $200 be fore the year was up. Even with signs of recovery the demand for oil is way off, so oil isn’t spiking because of the fundamentals, it is a reflection of softness in the dollar. If stock prices fall that would help mortgage rates fall lower.

In spite of the sell off on Friday, mortgage rates ended the week almost the same as they ended last week, and still near the best parts of our range. Time is a real factor if you are a first time home buyer counting on the $8,000 tax credit. We are now just 3 months out from the deadline of November 30^th, which is still plenty of time, but less time than you think. Unexpected delays are all too common in any real estate transaction, and you want to make sure you do everything under your control to get your purchase closed on time. If you are still not sure where to start, call me for 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. 625%         4.739% 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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