Welcome to Illinois Mortgage Rates and News week in review for the week ending December 4th, 2009, my take on the week’s financial news and how it affected Chicago Illinois mortgage rates.

This was a good news, bad news week in the economy and with mortgage rates. First the good news. The unemployment numbers released Friday showed a loss of only 11,000 jobs in the month of November, the best showing in 2 years. This was much better than the expected loss of 150,000 jobs, and light years away from the hundreds of thousands of jobs lost we’ve seen for most of the last year (over 900,000 at this time last year). It is still a loss, and the economy needs to gain about 150,000 jobs each month just to keep up with population growth, but if this number turns out to be real (there are always revisions the next month), this is more than less bad news, it would be authentic good news that the economy is recovering quicker than expected. Other good news is that if you acted fast, you could have locked in your refinance rate at the lowest rates in modern history. On the other hand, good news for the economy is bad news for mortgage rates. The refi boom from the low, low rates peaked after just a couple of days, and following the release of the employment report, mortgage rates surged back to their highs for the last 4 months (though rates are still low).

The strong employment report puts more pressure on the Fed to raise rates to keep the economy from over heating and letting the inflation monster loose. But this fear is still a ways down the road. One month doesn’t make a trend, and revisions of this number could change the outlook entirely. The unemployment rate is still expected to get worse over the coming months, and even if it is smooth sailing from here on out, the Fed isn’t likely to change short term rates until at least this summer. So I expect short term rates to remain low for quite some time. But unless there are some new shocks to the system, we have likely seen the lows for mortgage rates. One of the big reasons that rates have stayed so low was that Uncle Sam was propping up the mortgage bond market by buying mortgage bonds to keep the rates low. They committed $1.25 trillion for this program, and the program ends in April. One of the Fed members has gone on record and said that they will extend the program if needed, but if the economy is getting better on its own, and extension isn’t likely. Estimates are that the Fed buying has translated into rates being about ½ a point better than they would be other wise, so when this goes away (or when the market decides it is going to factor it in as already gone), mortgage rates are sure to go up. All the new debt auctions, need to keep pace with the increase in government spending, will also put pressure on rate to move higher.

I think the lowest rates are gone for good, but mortgage rates will be in an affordable range for quite some time. As the economy turns around, rates are bound to increase so this may be the best opportunity you will have to get the lowest rates in modern times. With the historically low interest rates, low home prices and the New Home Buyer Tax Credit extension I think thie Spring home buying market is going to get off to a fast and furious start. If you are looking for mortgage pre-approval anywhere in the country, give me a call and we can get the process started. If you are thinking of refinancing your mortgage, there may not be a better time to get started.

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. Mortgage rates in other states may be slightly different, give me a call and I will give you an accurate quote for your particular situation. 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              4.875%         5.069% APR

15 Year fixed Rate             4.375%         4.447% APR

5-1 A.R.M.                         3.75%         3.867% 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.                        4.875%         5.095% 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              4.75%       5.269% APR

With no origination fee – 45 day lock

30 year fixed rate              5.00%      5.264% 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

Call for quotes on FHA 203K Rehab Loans

VA Veterans Administration 0 Down Loans

With 1 point origination fee – 45 day lock

30 Year Fixed Rate            4.875%       5.116%

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.

Economic Calendar for the week of December 07 – December 11

Courtesy of www.briefing.com

Dec 07 Consumer Credit For Oct (Consensus  -9.3B Prior -$14.8B)

Dec 09 Wholesale Inventories for Oct (Consensus  –.5% Prior -.9%)

Dec 10 Initial jobless Claims  (Consensus  -465K Prior -457K)

Dec 10 Continuing Claims (Consensus  5435K Prior -5465K)

Dec 10 Trade Balance for October (Consensus  -37.0 B Prior -$36.5B)

Dec 11 Retail Sales for Nov (Consensus  .7% Prior -1.4%)

Dec 11 Retail Sales ex-auto for Nov (Consensus  .4% Prior .2%)

Dec 11 Business Inventories for October (Consensus  -0.3 Prior -0.4%)

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Downers Grove Mortgage Company

We Lend in All 50 States

Illinois Home Loans Provider/ Broker. Most respected mortgage bankers in the area.

Mortgage qualification guidelines are getting tighter again as Fannie Mae (along with FHA and Freddie Mac, one of the 3 big buyers of loans in the mortgage  market) is about to roll out the newest version of their Automatic Underwriting System (AUS), DU 8.0. Most loans are now approved through an AUS which is a type of artificial intelligence program. The systems grade each loan for risk and produce a decision which says whether the loan meets their standards, or not. Getting an AUS approval is just the first step. We still have to make sure that all the information entered into the system is correct (garbage in – garbage out) and even if the loan meets Fannie Mae’s guidelines, we need to make sure it fits the extra lender requirements and do all the other things needed to approve a loan. But the odds of getting a conventional loan closed without an AUS approval are beyond slim. It’s not going to happen. So when a new AUS system comes out, this is a big deal. Home buyers who are qualified to buy under the present guidelines, may not be able to qualify under the new rules. And with the release of DU 8.0, a lot of buyers are going to be outside looking in.

A lot of the changes will be tweaking the formula, and some of the changes are taking away programs which all the lenders stopped doing ages ago. The new release does away with expanded approval loans (those with riskier profiles) and raises the minimum credit score from 580to 620. But in the real world, lenders haven’t accepted expanded approval loans in the last 2 years, and with all the price hits included, anyone with a score below 680 is likely to get better pricing with an FHA loan. There are other changes, like a reduction in mortgage insurance requirements, which will lower the cost of financing for some home owners.

The biggest change in the new release is a maximum debt ratio of 45% – or possibly 50% with strong compensating factors. The debt ratio is the total of the new mortgage payment and all your other debt payments divided by your income. The idea behind the debt ratio is to make sure you are able to afford the mortgage and not taking on too much debt. A borrower with a lot of money in the bank and high credit scores is a much safer risk than someone with lower scores and no reserves, so they should be allowed to manage a higher debt load. Back in the old days when I first started doing mortgages (and dinosaurs roamed the earth) the back end ratio was set at 36% for conventional loan, so the 45% (or 50%) isn’t awful. When they adopted the AUS system, much higher ratios were allowed because they were looking at the entire risk profile, not just one number. With strong borrowers it wasn’t unusual to get approvals when the total debt was well over 55% of the income we were showing (many borrowers have income coming in which we can’t use to qualify).  This change will  mean that a lot of well qualified buyers who are able to make their payments, won’t qualify for a Fannie Mae loan. Freddie Mac hasn’t announced that they are following through with similar changes, yet, so for now there are still conventional alternatives for borrowers affected by these changes.

With these changes, FHA is likely to increase their market share, again. FHA is in the same boat as its cousins Fannie and Freddie in that they are under pressure to increase their loan quality and up their reserves. FHA has already announced that they will be tightening their guidelines too, but because FHA financing was just a sliver of the market when the housing bubble was expanding, it doesn’t have the same level of problems that its conventional cousins do. Also, FHA is set up as a way to make financing affordable for more home buyers, so even as they tighten, they will still offer more opportunities to qualify. FHA has a stated back end ratio of 43%, but when run through the AUS much higher ratios are common. You are only hurting yourself if you buy more than you can afford, but there are so many situations where a one size fits all approach doesn’t apply. It’s good that is still an option. At least for now.

Illinois Mortgage Rates                   First time home buyer loans  

We Lend in All 50 States

Peter Thompson (630) 479-6424