The biggest news this week on the housing front, was that existing home sales fell 27.2% in July. The June results were also downgraded, and now the inventory of unsold homes on the market is about a 12.5-month supply at the current rate of sales, up from an 8.9-month supply in June. A healthy real estate market usually has 6 months of supply or less.  New home sales also fell 12.4% for the month, to a level not seen since 1968. If you add in all the distressed homes that aren’t on the market, yet, this adds to the softness. Part of this picture is skewed, though. Housing is a mess, but part of the reason that sales are down now is because many of the buyers who would have normally bought in the last few months, already bought earlier in the year in order to take advantage of the home buyers tax credit. The extra supply of homes on the market is putting more downward pressure on home prices. The good news in all this bad news is that there are buyers out there, sitting on the fence and waiting for the right house at the right price. These buyers are motivated by bargains. I expect to see a small pop upwards in sales over the next few months as some of the fence sitters take advantage of the lower prices and low mortgage rates.

In other news, orders for durable goods, items expected to last three or more years, rose 0.3% in July mostly a result of some big commercial aircraft orders. The Gross Domestic Product (GDP), the total output of goods and services produced in the economy, increased at an annual rate of 1.6% in the second quarter, lower than the 2.4% increase initially reported. The biggest market mover for the week wasn’t a report, though, but the reaction to a speech by Fed Chairman Ben Bernanke. In an economic summit at Jackson Hole Wyoming, Bernanke talked about the state of the economy and how the Fed is prepared to step in again if needed to add further liquidity to keep the avoid a double dip recession. News stories have come out over the last few weeks about how the Fed is divided about what to do, and when. Some Fed Governors want to hold back and are more concerned with long term consequences, while Bernanke is said to be more willing to act now. His comments were interpreted as a sign that the Fed is contemplating another round of quantitative easing, pumping more money into the system, possibly through buying more treasury bonds or mortgages. The finger is on the trigger, but nothing is likely to happen unless the economy takes another turn lower.

The effect of all this on mortgage rates this week is that mortgage rates are still near their best rates ever, but volatility is high and rates are as likely to worsen as go lower. Even as mortgage bonds have improved, mortgage rates haven’t. On days that mortgage backed securities have a good day, the wholesale lenders hold their rates or improve just a little. When mortgage bonds have a bad day, the wholesale lenders jump at the chance to raise rates (or more likely the pricing which determines the rates). Some of this is due to a normal cautious nervousness when rates are at previously uncharted highs. Part of this is because all the lenders pipelines are full, and they aren’t as hungry for new business when they are near capacity now. As some of the loans close, and more room is available, we may see some improvements, but for those waiting for the next leg lower in rates, it may be a long wait. There is a lot of activity this week, including the most watched indicator the employment report which will be released Friday morning.

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a 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.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

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

FHA 203K Rehab Loans – Call for Quote

VA Veterans Administration 0 Down Loans

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.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

This week the National Association of Realtors announced some grim news – existing home sales were off 27.2% in July, the worst reading in 15 years. Though this news is grim, it isn’t surprising. The real estate market has been hit hard and with employment high, it isn’t likely to turn around soon. But the numbers don’t tell the whole story.

There are a couple of things to keep in mind that put this number into fuller context:

• First time home buyers bought in force earlier in the year to take advantage of the tax credit. So many buyers who would have otherwise been in the market now, have already bought. July’s numbers were worse than expected, but sales came in stronger earlier in the year.

• Real estate is seasonal. Home sales usually peak in the Spring time, dip in the Summer and then there is usually a smaller increase in the fall. Traditionally, Summer is one of the slowest times for real estate sales. First time home buyers often buy in the Spring after getting their tax refunds, and families want to buy earlier to make sure they allow time to close and be in the house before school starts in late August.

But no matter how you spin it, these numbers are low. This is bad news if you are a homeowner and you are planning on selling your home soon. There are so many people who own a home now and need more space, but are stuck in their current home and have to sell before they can buy. The number of homes for sale has risen, even as home sales have dropped, so the inventory of homes for sale is high. This puts more pressure on home prices to drop even lower. But there is also a good side to this, but only for those who are still on the sidelines and haven’t bought a home yet.

I am seeing contracts on homes in areas I know well, where the prices are going back in time to where they were 10 years ago. With so many homes and so few buyers ready to move now, it is a true buyer’s market, and the home that are selling are selling at great prices. Add to this that mortgage rates are at all time lows, and this means that mortgage payments are going even further back in the time machine. Affordability is the key to any recovery now, and I do expect to see some increase in sales over the next months. And for those who do buy, homes are now more affordable than they have been in years. And in the long run, this is a good thing.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago FHA Mortgage Company

The big story of this last week was volatility. Most of the reports last week gave weight to the slowing economy theory. Home starts declined again this week and are now down to the lowest number since 1968. This is still the overhang from the bursting of the housing bubble, and we won’t see a significant degree of new starts until the economy is on the upswing and a good portion of the extra housing units have been absorbed (make that homes are selling again). Weekly unemployment claims were up again, with nearly 500,000 new claims. This number is a whole lot better than the worst of the crisis, but the claims are growing again (mostly because government paid census workers are off their jobs), so this adds more doubts of a real recovery. Probably the most influential report released last week was the Philly Fed Business Outlook Survey. This is a measure of business activity in the Philadelphia region. It was expected to show a slight increase in activity, but the results came in with a decrease of 7.7% from the previous month, much worse than expected. In addition to all the news in these reports, stocks were lower, too. So mortgage rates should be lower, right?

Usually, bad news for the economy means good news for mortgage rates. But right now, even though rates are at all time lows, rates are holding, but volatility is increasing. Mortgage rates are determined in good part by activity in the mortgage backed securities (MBS, a type of bond) market. With all the bad economic news over the last months, there has been a flight to quality with investors leaving riskier investments and putting their money in safer spots. The safest investment of all is considered to be US treasuries, and mortgages, being backed by the US government, come in close behind. The chart below shows activity in the MBS market over the past month. Each figure is one days worth of trading. The green figures show that prices improved over the course of the day (trending toward lower rates) while the red marks show deterioration in the days prices (higher rates). Look at the last week’s activity. The longer length of each figure means there was a big trading range for the day, and the preponderance of red means a nervous market. So what gives?

I think there are two things working here. First of all, investors are rethinking the risk in these bonds. By buying MBS they are taking on a fixed rate return over a long period of time. If stocks dive or other investments have negative returns, this is a wise strategy. But the return is so low, and rates have fallen so fast, that there is concern from some that we are in a bond bubble. If any hint of inflation comes out, these returns will quickly evaporate. So all of a sudden investors are getting cautious and holding off and reconsidering their positions. Another big factor is that a lot of these bonds are bought by mortgage companies to hedge their production. One big risk for consumers, is that with rates as low as they are, the mortgage industry is running close to capacity. We are in a big refinance boom again, and our pipelines are fuller than they have been since the beginning of last year. When this happens, mortgage companies often control their volume by pricing higher. I do my personal banking at one of the mega banks that are trying to control everything. Whenever I go into their lobby I always check out their marquee sign which tells their daily mortgage rates. We are always priced lower, usually by an 1/8 or a quarter of a point on the best conforming borrowers. I stopped in last week, and the rate on the sign was 3/8 higher in rate, plus a point in fees (each point is 1% of the loan amount). The difference here is jaw dropping. If you took on a $300,000 mortgage through them on these terms, that means an extra $3,000 in up-front costs, and about $60 more per month in payments. But there is a strategy to this. These rates tell me that they are overwhelmed with business, and can’t handle extra volume. Instead of putting up a closed sign and not taking in any additional applications, they raise the rates to slow the flow of inbound business. Wholesale lenders are doing the same thing, though not so drastically. What this means to you, if you are in the market to refinance or take on a new mortgage, is that these rates may be as good as it’s going to get. At least for a while. A lot of the bad news is already baked into the system, and there may be more risk on the upside. Rates are great, and I expect we will stay in this range for a while, but if you are waiting for rates to drop even further, you may have a long wait.

 Here are the current Chicago 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, best FHA rates assume a 660 Fico score, but loans are available with credit scores as low as 620. 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 will take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a 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.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

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

FHA 203K Rehab Loans – Call for Quote

VA Veterans Administration 0 Down Loans

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.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

Calculated Risk, one of my favorite financial blogs, found some interesting information released by the census bureau in the American Housing Survey. I found some surprising and interesting information in the report. Among the findings released are:

So why are there so many home owners who might benefit from a refinance who stayed with their original mortgage? I can think of a few reasons:

1. They don’t know that they can lower their payment – this is a possible reason, but only if they are hermits who don’t have access to the internet, radio or mail. We are all subjected to constant advertising, and over the last 10 years mortgage advertising was impossible to avoid.

2. They don’t think it is worth it to refinance – this is much more possible. I still hear people say that you need to lower your rate by 2 full points before it makes sense to refinance.  At one time you needed to pay up to 3 points (each point is worth 1% of the loan balance) in order to refinance. Now, we can usually do no cost refinances with larger loans ($200,000 or up, usually), and even with smaller loans the cost to refinance is reasonably low. The real key is again the pay back period, how long it takes for the savings from refinancing pays back the cost of refinancing, and then comparing this to how long they plan to stay in the home.

3. They don’t think they can be approved – I know there are people who realize that rates are lower and they could get a better rate than what they currently pay, but they doubt if they could qualify. In many cases they are right. It is tougher to qualify now than it was a few years ago. But if they have the same mortgage they had back in 1999, and they qualified then, there is a good chance they could qualify now. I have conversations all the time with people who are in excellent shape who think they are in far worse shape than they are.

Another reason may be that for most people, getting a new mortgage is just not on their radar screen. They know what their payment is now, and if it isn’t painful enough that they need to do something about it, it is easy enough to put it off and not do anything. So there are a lot of home owners who could still benefit from the refinance but haven’t. And chances are, they won’t.

Peter Thompson                              630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Refinance

The big news in the Fed release yesterday was that they will keep the level of Fed holdings constant by reinvesting principal payments into new Treasuries and Mortgage Backed Securities. This isn’t the big tip of the scales like last year when they printed up more money to buy 1.25 trillion dollars of mortgage backed securities, which sent mortgage rates down new lows. This is more of a baby step, or to keep the scale analogy, they are putting their thumb on the scale to gently tip in the favor of more liquidity. This could be a just a little nudge for symbolic purposes, or it could be the first step toward a new round of aggressive Fed intervention. Either way, this is an acknowledgment that the economy is slowing and inflation is the least of our problems. In this statement the Fed is saying that they are ready and prepared to act as needed to try and get growth back on track. This means that mortgage rates are likely to remain in a low range.

Here is the Fed release in full:

Release Date: August 10, 2010

For immediate release

Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.

Measures of underlying inflation have trended lower in recent quarters and, with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve’s holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.¹ The Committee will continue to roll over the Federal Reserve’s holdings of Treasury securities as they mature.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.

Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and limits the Committee’s ability to adjust policy when needed. In addition, given economic and financial conditions, Mr. Hoenig did not believe that keeping constant the size of the Federal Reserve’s holdings of longer-term securities at their current level was required to support a return to the Committee’s policy objectives.

The economic news released last week was mixed, but the Big Kahuna of reports, the employment report, came in worse than expected, and that trumps all the other news. On the good side, the ISM manufacturing index came in higher than expected showing that manufacturing activity has expanded in each of the last 12 months. The personal savings rater also increased for last month. On the negative side pending home sales came in low (not a real surprise since the summer is usually slow in the housing market and many borrowers moved up their buying to take advantage of the tax credit earlier in the year), and consumer confidence dipped again. But the number that really mattered was the employment report. On the surface this showed a loss of 131,000 jobs, in July, though after discounting the 143,000 temporary census jobs lost, the more accurate number was a gain of 12,000 jobs. But even this gain is small. In a normal economy it takes about 120-150,000 new jobs each month just to keep up with the new job seekers (think of all the recent graduates looking for a job). So the growth now is still putting us further behind. The real worry here is that job growth is decelerating. After the economic melt down nearly 2 years ago, job losses were in the high hundreds of thousands each month. After unprecedented action by the Fed, and the huge stimulus package passed at the beginning of the Obama presidency, the losses stabilized and and we had a period of improvement. But in a normal business cycle the growth should be accelerating. When the economy first tanks, the Fed loosens the money supply and government increases their spending in order to prime the pump. By this point private industry should be feeling more confidence and hiring new workers. But commercial lending is still off, and the private sector is still treading water.

The question now is what comes next? The big political concern is that with all the government spending we have put ourselves in a hole for years to come, so there isn’t much chance of a new stimulus package any time soon. We may know more after the Fed meeting this Tuesday. The Fed is expected to acknowledge the slowing of the economy, and there are all sorts of rumors about what they will do. One possibility is that they will start a new purchase program for mortgage backed securities. But mortgage rates are already at all time lows, and though this has been a great deal for those who are able to refinance, it isn’t making a big difference to the housing market or doing anything to stimulate overall job growth. We will know more of their plans soon. It is likely that we are in for a long slow grind to get out of this recession. The good news in all this bad news is that mortgage rates are at levels we never thought they would drop to. If you can refinance your mortgage, this may be a great way to save money. One thing to keep in mind is that you don’t need a lot of equity in your home to be able to refinance. Their are programs which allow home owners who have loans backed by Fannie Mae or Freddie Mac to refinance on good terms, even if their homes are worth a lot less now than when they bought them. If you have an FHA loan, even one you took on in the last year or two, the FHA streamline refinance is a great way to save and you can often do this with no closing costs. If you would like to see if refinancing your mortgage is a possibility, or how much you will save, let me know. 

Here are the current Chicago 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, best FHA rates assume a 660 Fico score, but loans are available with credit scores as low as 620. 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 will take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a 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.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

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

FHA 203K Rehab Loans – Call for Quote

VA Veterans Administration 0 Down Loans

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.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

The Cash/Out refinance has been a long time favorite of home owners who wanted to consolidate debt or take out home equity for other purposes. Being able to take equity out of your home has always been a big benefit of owning real estate, though it grew to an absurd degree during the bubble years. It’s not so easy to take cash out now. For one thing the standards have been raised and lenders now require more equity retained in the home. But the bigger issue is that with home values down, many home owners have lost equity, and many are upside down owing, more on their mortgages than their home is worth. This has led to the newest major trend in lending, the Cash/In Refinance.

A cash/in refinance means you are coming to the closing table with extra money to pay down the mortgage so you can take advantage of the low refinance rates available now. This is obviously not an option for everyone. You can’t add in cash if you don’t have it. But for those home owners who do have cash available, it can make sense for a variety of reasons. Part of this is a change in attitude and a change in expectations. The old idea was that the value of real estate would always go up, and many owners bought for the short term. Now, staying put is a more realistic option for many, and if you plan on being in your home longer term, it makes more sense to get the best mortgage rates available, even if you have to invest more to do so.

Here are some reasons it might make sense to pay down your mortgage in order to qualify for a new loan:

This could be the best investment return available – If you have money in a checking or savings account, you are earning almost no interest. If you have money in stocks, the risk is high and many analysts expect the market to remain flat over the next several years. By adding cash to your home and getting a guaranteed return with a lower mortgage rate, this could be the best and safest investment opportunity available.

Get rid of your PMI – If you put less than 20% as a down payment on your home, you are require to carry private mortgage insurance or PMI. PMI doesn’t help you directly, but without it you wouldn’t be able to buy unless you had the larger down payment. If you are now in a position to pay down your loan and get it to the required 20% equity, you not only lower your interest rate, but drop the mortgage insurance. For example, if you originally put down 5% on a $200,000 loan, you are paying about $130 each month in PMI. If you can save a half a point in interest and get rid of this payment, that would be a great use of your money.

Get below Jumbo pricing – Jumbo mortgages are loans that are over the maximum lending limits for conventional financing, which is $417,000 for a single family home here in the Chicago area. There is a big difference in pricing between conventional and Jumbo pricing, currently about .75% on a 30 year fixed rate. If your loan is close to the conventional limit, or if you just got a big bonus or an inheritance from a rich uncle, this refinance could save you a lot of money. Another option is to combine this with a second mortgage or home equity loan. If the first mortgage is at 80% of the home’s value, you can get the best pricing, even if the combined loan to value (both mortgages compared to the value of your home) is higher. 

Avoid pricing hits – There are loan level price adjustments or price hits added on for all sorts of situations. There are big add-ons to the rate for having lower credit scores as well as the type of property (condos with less than 25% equity get a big price hit). These price hits can go away when you have a larger equity position. This doesn’t make sense for everyone, but it is a consideration and worth looking into.

With the housing market stagnant, it may be a while before we see values increase. If you are in a position to lower your rate and your payment, a cash-in refinance might be a good option.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago FHA Mortgage Company

Since the bottom fell out of the housing market, FHA has become the best financing choice for a big slice of homebuyers and home owners (FHA makes up about 40% of the loans originated now). When all the private lenders dropped out of the market, and Fannie Mae and Freddie Mac tightened their guidelines and added big price hits, FHA stepped in to fill the gap. FHA is the only option for home buyers with low down payments (3.5% down, and this can all come from a gift) and though this is a fully underwritten loan, FHA is more forgiving of past credit mistakes if the underwriter can understand what happened, and why it won’t happen again. In many ways FHA has become the new conventional, and the financing terms work best even for many borrowers who could qualify for conventional financing. But all this success has come at a price. Over the last two years FHA defaults are at record highs, and their reserve fund, which they use to pay claims on defaulted loans, is the lowest it has ever been. Last year FHA  moved to bulk up the reserve fund by increasing the Up-Front mortgage insurance by .75%. With a new bill just passing the House, and now fast tracked in the Senate, it looks like FHA is about to restructure their formula again.

We need a little background to explain how this will work. FHA’s mission is to make homeownership more available. This isn’t a government give away or a loan for people who can’t qualify. First of all, FHA doesn’t make loans directly. They act more as a mortgage insurance company insuring the lenders who actually hold the FHA loans against loss if the home does get foreclosed on. This system has been around since the 1930s and has always been self funded, that is, the mortgage insurance they collect has been enough to pay for all losses without any additional government funds. But with true unemployment in the double digits, and home prices fallen, the FHA reserve fund has come under pressure. Compare this to Fannie and Freddie which have been bailed out and taken over by the government, or all the big banks which would have collapsed if Uncle Sam hadn’t stepped in to prop them up. So FHA has been a huge success and a key to any recovery in the housing market.

FHA funds their insurance in two ways: with an Up-Front Mortgage Insurance Premium which is rolled into the loan and financed over the course of the loan, and also with an additional monthly mortgage insurance premium. The last change increased the Up-Front MIP from 1.75% to 2.25%. The new bill will raise the maximum monthly insurance premium to a maximum of 1.55% (divided by 12) but the understanding from HUD (the agency which runs FHA) this number is to give flexibility and the real increase won’t be this much, and there will be some trade offs. HUD has previously said that the plan is to decrease the Up-Front MIP down to 1%, a big reduction, and increase the monthly factor to 0.9%(divided by 12). So this will be giving with one hand while taking away with other. I have a feeling that the law of unintended consequences could kick in and make FHA more attractive for many borrowers who have the choice to go with conventional financing, while making it a little harder for those most in need to qualify (it increase the monthly payments while decreasing the cost in the short run).

We will see how this all plays out, but if this insures that FHA will continue to be available in the market, it is a change worth making.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago FHA Mortgage Company

Mortgage rates are now at their best levels ever, or at least the best over the 50 years they have been tracking 30 year fixed rate mortgages. The general consensus now is that the economy, though still growing, is decelerating. The financial community is now seeing that this isn’t going to be a fast recovery, and with continued high unemployment, deflation, or more likely disinflation, is a bigger immediate worry than the fear of inflation. The big news last week was mostly bad – June new home sales were the worst on record, the GDP came in at a gain of 2.4%, lower than expected and about half the previous reading. For good news, the consumer confidence index came in slightly better than expected, though still off from the previous month’s reading. The stock indexes are still holding, and corporate profits are still high, but much of this has to do with cost cutting and higher productivity, not top line sales growth.

As I have said before, bad news in the economy is good news for mortgage rates. This week we broke out of a trend and are now at the lowest rates ever. The graph below shows the activity in mortgage bonds) which to a large extent determine mortgage rates) over the last 3 months. Each figure on the graph shows one days activity. The green means that the market closed higher than it opened, the red means it closed lower. The bonds are trading on price, so the higher prices mean lower yields, or lower mortgage rates. As you can see, Friday’s reading is a new high (though it was down from the price it opened at).

(Mortgage Backed Securities graph is courtesy of Rate Watch by MortgageCoach.com)

The question now is, is this as good as it gets? We are now at a point where nearly everyone who is able to refinance can benefit from it – even those who took advantage of the low rates in the last big refi boom last year. With no-cost and low-cost options available for many home owners, this could be a great way to save money and lock in historically low mortgage rates. But even though rates are now in the low 4s, I know there are people who will wait for them to go even lower. Last year there were a lot of people (both financial analysts and homeowners) who were convinced that rates would be at 4.50%. The new goal is sure to be 4.0%. The truth is, no one knows where the economy will end up or where mortgage rates will bottom out. I do know that bthese rates are the lowest ever, and if you can refinance with no costs, your savings are immediate. Whether you lock in now, or let it ride as you wait for even lower rates, it does make sense to get your documentation together and talk to a good loan officer to see what this will do for you.

Here are the current Chicago 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, best FHA rates assume a 660 Fico score, but loans are available with credit scores as low as 620. 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 will take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

*(Another option is to break your Jumbo loan into 2 parts a 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.)

** 5-5 ARM is fixed for first 5 years, with 2/6 caps it can’t go more than 2% above the start rate for the next 5 years. 2% cap for next 5 years – so a blended rate over 10 years is no more than 1% over the start rate. Super Jumbos available.

FHA LOANS 3.5% down payment FHA Maximum varies by County

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

FHA 203K Rehab Loans – Call for Quote

VA Veterans Administration 0 Down Loans

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.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company