FHA credit score requirements are moving up again. We, and most other lenders, now have moved to a minimum 640 middle score for FHA approval, and some wholesale lenders now require a minimum of 660. If you read the FHA guidelines, the minimum score is only 580 (though there is no way you will get a loan with that score), and with the economy soft and the housing market down, cutting off otherwise well qualified buyers doesn’t seem like a good way to achieve their goal of offering more families a chance to buy a home of their own. So what gives?

The problem is that this tightening of credit standards is a direct result of FHA success (I’ll get into this more in a minute). As anyone who reads this blog regularly knows, I am a big fan of FHA mortgages. FHA has always offered common sense, fully documented loans to middle class and low income borrowers. FHA is often thought of as a first time home buyers loan because you only need a small 3.5% down payment and their philosophy on credit was more realistic in that they were willing to work with people who had mistakes in the past.  The key with FHA credit issues is that they needed to understand the situation – what caused the problems, that the borrower is back on track and that the credit problems aren’t likely to continue. FHA was never a score based loan, it was a loan that looked at each situation individually. As someone who reads and analyzes credit reports every day, I can tell you the credit score is just a starting point. For example, 2 of the credit reports I looked at this week from different borrowers had almost identical scores, both in the low 600s. One was a single parent who went through a divorce and had some uninsured medical issues which stained her credit, but is now paying everything on time and trying to rebuild her good credit. The other was from a single guy who makes a great income but travels regularly and doesn’t have a system to pay his bills on time. He can afford to pay when the bills come due, but hasn’t gotten in the habit of doing it. To me these people, even with the same scores, should be looked at differently.

Up until a few years ago FHA never had a minimum score requirement. The score requirements are now coming from the lenders who take on the FHA loans (FHA doesn’t make loans themselves, they insure the loans that meet their requirements) and again, they are raising the scores because of the program’s success. A few years ago, before the financial melt down, FHA accounted for about 2% of the loans originated. 100% financing and sub-prime loans had taken away most of the borrowers who would normally be FHA buyers. Now, most of the companies making these riskier loans have gone out of business or been bailed out by the government, and FHA market share is in the 30 to 40% range. As conventional mortgage guidelines have gotten tougher, more borrowers who would have otherwise been conventional buyers are now better served by FHA. One result of this is that the average credit scores for FHA loans has increased a lot over the last years, from the low 600s to near 700.

But with their market share increasing so dramatically, this has also put pressure on the FHA reserve fund. FHA insures against losses by collecting mortgage insurance premiums on every loan they insure. This has been enough to keep the program solvent since its inception back in the 1930s, but with unemployment high and home values decreasing, this has increased loan defaults and decreased their reserve fund. Although Fannie Mae and Freddie Mac and all the big banks have had to go to Uncle Sam to keep their doors open, FHA is doing this on their own. In order to protect their fund, they have taken several big steps. Earlier this month they changed the way they collect mortgage insurance in a way that will build funds quicker. They also have put more pressure on lenders who make the FHA loans, shifting more risk from FHA to the lenders, and this has spurred the increase in score requirements.

The lenders who approve and fund the loans have always been responsible for making sure that the loans conform to FHA guidelines, they are now being held to a higher standard. Now the lenders are also held accountable for the default rate, or the percentage of loans that go into default (missed payments up to foreclosure). This means that FHA could force a lender to buy back loans that go south, even if the loan met all the guidelines and everything was done according to the rules. The truth is that you never know for sure what loans will go bad, because so many of the problems arise when an unforeseen life event happens to a borrower. It doesn’t matter what your credit score is, if you lose your job, have a death in the family, a medical emergency or another traumatic life event, your finances will be under stress.

From the lenders standpoint, the worst thing that can happen is being forced to buy back a loan. Lenders make money by originating loans and then selling them off and collecting their profit upfront. When they are forced to buy back a loan, this is a big loss. Since lenders aren’t in the habit of doing anything that will cost them money, raising the credit scores is a logical way to cut the risk in their portfolio. This isn’t what FHA was hoping for, though. This move by FHA to hold lenders accountable, is having the unintended consequence of making it harder to qualify for those who FHA is meant to serve, and by taking otherwise well qualified buyers out of the housing market it is making it harder to build a housing rebound. FHA Commissioner David Stevens recently said that he though some lenders had gone overboard on the credit tightening, and "You won’t help communities recover if you limit lending to just the top tier borrowers." But without specific action from FHA the lenders are going to continue with a tighter credit policy, because this is the safest course for them.

What this means to new home buyers or anyone thinking about getting FHA financing.

Credit is now more important than ever. If you are thinking about buying a home, the best thing you can do is to start the process early, have your credit run and get pre-approved for a mortgage. Sometimes there are problems on your credit report which you may not even be aware of. If you start early you have time to make sure you address the issues and get mistakes cleaned up, before it’s too late.

Here are links to past articles which cover how credit scores are determined, what you can do to improve your credit and how to remove mistakes on your credit report.

How to understand and improve your credit score-part1

How to understand and improve your credit score-part2

How to understand and improve your credit score-part3

How to understand and improve your credit score-part4

Free Home Buyer’s Guide

No-Obligation Mortgage Pre-approval

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

The news released this week was somewhat positive, but still in a low range. Housing starts rose and home builder sentiment is the highest it has been since the beginning of the summer. But both these measures are ticking up from depressed levels so low it hardly makes a difference. The index of leading economic indicators — designed to forecast economic activity in the next three to six months — rose 0.3% in September. Initial unemployment claims fell by 23,000 to 452,000 for the week ending October 16. On the other side, industrial production and retail sales both came in lower and below expectations. But the economic reports aren’t the real focus now. The big question for those following mortgage rates, is what will the Fed announce at its next meeting, and are they about to start a new policy of quantitative easing? From hints dropped in speeches by Fed members last week, the answer seems to be that it is coming. So for now, the mortgage backed securities markets (and mortgage rates) are in a holding pattern. Mortgage rates are at all time lows, but going back and forth within a set range. Whether rates drop lower once the policy is official is anyone’s guess. The last time the Fed put this policy into effect (buying 1.25 trillion dollars of mortgage bonds) the best rates came at the announcement and then popped higher after the program actually started. 

The other big question is, if quantitative easing comes about, what will it really accomplish? There is no doubt it will extend the refinance boom. Lower rates will open the door to refinancing for a new wave of home owners who already have low rates, but can now go even lower. but this still won’t solve the problem for those who haven’t been able to take advantage of the low rates because of low property values and tougher underwriting standards. Will lower rates be enough to reignite and spark activity in the housing market? Even with record low interest rates, the lowest home prices in years and low down payment financing available, home sales are few and far between. My own feeling is that we may not have seen the bottom of the market yet, but we are close and this is a great time to buy. But as long as unemployment remains high, foreclosures remain a problem and fear is still the dominant emotion, most home buyers, even those who need and can afford to buy, will remain on the sidelines. For those who are ready to make a move, mortgage rates are unbelievably low.

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            Chicago FHA Mortgages

One question I hear all the time, is – When will rates drop to 4.00% (or 3.75% or whatever mortgage rate is conceivable but just out of reach)? Mortgage rates are at all time lows, but it is human nature to always want a little better than what is available at the time. No one wants to take on a loan now and then have mortgage rates drop even lower. I usually hear this question after the market has gone in the wrong direction for a few days, but I was hearing variations of this last year (when will rates drop to 4.5%). Sometimes the question comes up after someone is referred to me by a friend or co-worker who just got a great rate, or by someone who heard someone talk about the unbelievably low rate they just locked into. In cases like this we don’t always get the whole story. If their friend locked into a 15 year fixed or an adjustable rate loan, the rate will be lower than the available 30 year fixed rates. Sometimes the friend doesn’t mention that they paid points (higher closing costs) in order to take on a lower rate. The truth is that there is not one mortgage rate available, but many. Your mortgage rate depends on what type of mortgage you are getting, your personal financial situation, the type of property, how much you are willing to pay to close and a number of other factors, as well as what is happening in the mortgage rates market at the time. We can break these down to three categories which determine what rate you can get on any particular day. Some people can get the best rates now, while others may not even be close.

The three factors that determine what rate you are able to get are:

1. Your personal situation and the characteristics of your loan.
2. What is happening in the mortgage backed securities markets and the back offices of the big lenders.
3. How much you are willing to pay to get the loan.

Lets look at each of these in detail.

Your personal situation and your loan characteristics

When people are shopping for a mortgage, most assume that it is a one size fits all situation. But each loan is priced on its own. There are loan level price adjustments (price hits) for a variety of situations, and other things that influence your loan pricing. Some of the factors that could influence your pricing include:

• Fico scores –Fico scores above 740 get the best conventional pricing. When scores are below 700 the price hits get big (with conventional loans), which means higher interest rates or more money at closing. So the better your credit score, the better your chances of getting the lowest rate.
• Loan to value – Loan to value is a way of looking at how much equity you have in the property. The more equity you have, the less risk, so this can affect your pricing on the loan. This actually works two ways. If you don’t have much equity there can be price hits, but if you have lots of equity in your home the pricing could get better.
• Loan Amount – There are price hits for smaller (under $100,000) mortgages, but the bigger issue here is that bigger loans bring in more revenue for the company. It costs the same to process a $40,000 loan as it does a $400,000 loan. But at the same rate, the larger loan is much more profitable. This means that you will get better pricing for the larger loan amount. Also, if your loan is above the lending limits ($417,000 for a single family home in the Chicago area) this will be a Jumbo mortgage and the rates will be higher.
• Property type – There are price hits for financing condos (unless you have 25% equity) and multi unit buildings.
• Secondary financing – If you have a second mortgage or a home equity loan this could be another price hit, depending on how much equity you have in your home.
• Type of mortgage – If you take on an adjustable rate mortgage, or pay the loan off in a shorter time frame (15 years instead of 30 years) the rate will be lower. FHA loans are priced differently than conventional loans. Adjustable rate loans are always lower than fixed rates because you are taking on more risk. Make sure you are comparing apples to apples when you compare rates. If you have a friend who just refinanced into a loan in the 3s, it probably isn’t a 30 year fixed.
• Property use – If you don’t live in the property (and it isn’t a second or vacation home), it will be considered non-owner occupied, and there will be big price hits meaning higher rates. 

Bottom line, each loan is priced individually. But even when you are comparing your own situation, mortgage rates can change from day to day.   

What is happening in the mortgage backed securities markets and the back offices of the big lenders

This is going to get a little complicated, but here it goes -Mortgage rates go up and down based on what is happening in the economy, and this is reflected every day in the mortgage backed securities (MBS) markets. Lenders use these mortgage bonds to hedge their rates, buying up contracts and locking in their profits. They buy enough bonds  to cover their expected production, and by buying bonds that match up to the rates they are charging, they know what rates they will deliver 30 or 60 days later when the loan actually closes. Locking in your rate means that you are guaranteeing the rate you will close at. This gives you security, and you know there won’t be any last minute surprises where the rate jumps higher at closing. But rates change every day. Good news in the economy (more jobs created, increased production) is looked at as bad news for mortgage rates, and bad news (loss of jobs, any sign that the economy is dipping) is looked at as wildly good news for mortgage rates. The reason for this is that the MBS market is a type of crystal ball. Investors in mortgage bonds include insurance companies and hedge funds, investment companies and other countries (especially China and Japan), buy mortgages bonds because they are considered low risk (even now, because the US government is behind them). The other group of buyers to add in to this mix are the traders who add liquidity to the market by making bets on the direction of interest rates by buying and selling these bonds.

The day to day change in mortgage rates is largely determined by economic news, and again, bad news in the economy usually means good news for mortgage rates. But there are a couple of other factors that shape mortgage rates each day. One major factor is the traders that buy and sell MBS. They react to each day’s news by buying and selling contracts, trying to get in front of whatever the trend appears to be. The market can be volatile and swings in the market on a day to day basis can be significant. But the truth is that rates normally trade in ranges (until something happens to push rates into a new range). So even with market swings, someone closely following the market can do a pretty good job of predicting when the rates are about to hit the best part of the range and it is time to lock in, or are near their worst levels when it is a better bet to float. But there is one other factor that makes this a little more complicated. The MBS market is the basis for mortgage rates, but the actual rates charged are determined by the lenders (usually the wholesale lenders who buy the majority of the loans in the mortgage aftermarket) making the loans. Lenders again hedge their pipelines to be able to guarantee their rate locks, and they are sophisticated enough that they play the ranges along with the traders in the market. But even if they have locked in their own pipelines, they don’t always offer the best pricing in their daily rates. Lenders offer rates based on whether they need more loans, or not. It takes time, effort and manpower to process and close a loan. When a lender has excess capacity, they are likely to offer better rates. When their pipelines are filled and they have more loans than they can handle in a reasonable amount of time, they turn off the spigot by raising rates. Sometimes you will have one wholesale lender who is more aggressive with their pricing than others, because they need more loan volume. Once their pipelines are filled, they come back in line with the other lenders in the market.

Right now the big question is what the Fed will do at their next meeting (November 3rd) and whether they will start a new policy of Quantitative easing, or pumping more money into the economy by buying treasuries and MBS. The goal of this policy will be to lower rates, and the smart money says that this policy is almost a sure bet. But the question then comes down to whether this will mean mortgage rates will actually fall lower, or if the pricing is already built in because everyone expects the Fed to pull the trigger soon. Mortgage rates dropped when the idea was first floated, so I am in the camp that a good portion of the improvement is already baked into the rates now. Rates could drop lower, but barring new evidence the economy is dropping lower, I don’t think we will drop a whole lot lower.

The bottom line here is that mortgage rates change on a daily basis, and sometimes the reasons are clear, other times they aren’t. Many borrowers are best served by just locking in the rate when they apply, and being able to relax knowing that they got a rate that works for their needs and they don’t have to worry that rates will spike higher. But if you want to try and time the rates, you either need to follow the market closely and be able to move fast when the time is right, or you need to work with someone who will do this for you. Find a good, knowledgeable loan officer who watches the market and they can help advise you on what the best strategy is for locking in your mortgage rate.

How much are you willing to pay to get the loan?

The last major factor in what rate you get is how much you are willing to pay to get the best mortgage rate. If you look at the rates in the newspaper or some of the rates quoted in the internet, rates are likely to look very low. But the flip side of the lowest rate quotes is that the cost of getting these rates (points and fees) is going to be higher. Because almost all lenders are getting their money from the same sources, mortgage rates should be very close from lender to lender. When comparing different rate options you need to make sure you are comparing apples to apples. Sometimes it makes sense to pay extra to get a lower rate, other times it is smarter to pay less (or no closing costs at all) and take on a slightly higher rate.

If you are thinking of refinancing your mortgage, you should always do a break even or pay back calculation. For this you need to know 3 things:

1. How much will you save by refinancing?
2. How much will it cost to refinance?
3. How long do you think you will stay in the home, and with this mortgage?

The first step is to determine how much you will save. For an example, if you now have a mortgage with a $200,000 balance and a 5.00% interest rate., your mortgage payment is about $1,073 per month. Now, if current rates are at 4.00% (this is an example.  Call me if you want a personal quote) the new mortgage payment would be $955per month. The lower rate means a savings of almost $118 each month. This is a great savings, especially when you look at it over the life of the loan, But does it make sense to refinance? Maybe. We still need to know more, though.

The next step is to find out how much it will cost to refinance. This is where it can get confusing. If you have spent any time on the Internet, you’ve seen lots of ads for mortgage companies claiming they offer the lowest rates. But low rates don’t mean a thing if you don’t look at the closing costs too. I’ve seen closing costs differ by as much as $6,000, so this is something that can make a huge difference. Closing costs include title fees, the cost of the appraisal and bank charges as well as points – which are upfront financing charges.

The difference in closing costs can make a big difference in whether the loan makes sense, or not. If you are paying $1,800 in total closing costs, it will take you a little over a year to payback the closing costs with the $92 savings from your new rate.  After that, every payment you make will be a true savings. But if that same loan cost $6,000 to close, then it would take close to 5 years before you would get any benefit at all from refinancing. So the lowest rate isn’t always the best deal.

The last question, is how long you do you expect to be in your home and in the mortgage. If you plan to stay in the home for at least 10 years, then paying more to get a better rate might be the best strategy, especially if you think (like I do) that rates are about as low as they will ever go. But most people don’t stay in their home forever. If you aren’t sure how long you will stay in your home, you might be better served by getting a loan with lower closing costs. Even though the rate and payment may be a little higher, your savings will come much quicker.

We can take this idea one step further. When rates are down, the biggest obstacle to homeowners lowering their payments and taking advantage of the low rates is the cost of refinancing. The more that the loan costs, the longer you will need to be in the new loan before refinancing makes sense. So if a loan costs a lot up-front, it takes a big improvement in the rates before it is worth doing. On the other hand, if there are no costs at all, a small reduction in the rates can save you a lot of money over time.

With a no-cost refinance we use the yield spread premium (the money that the wholesale or end lenders pay us to bring them the loan) to pay for the closing costs. When I price loans I have several different options. Every day the lenders we deal with send us new price sheets. These sheets have matrices which allow us (the mortgage banker or broker) to price the loan in different ways. It is common in the Chicago area to price a loan to show no points or origination fees, but with the customer paying the normal costs at closing. If someone wants a lower rate, I can price it so that they pay more money up-front (points) and get a lower interest rate. We can also do it the other way, offering you a slightly higher interest rate (where the lender pays us a higher premium) and we can use part of this premium to cover all your closing costs.

Here is how it works. If you have a mortgage with a balance of $250,000 and an interest rate of 5.00%, your loan would have a monthly payment of $1,342 for principal and interest. If rates drop. and you are able to refinance at 4.00%, your new payment will be $1,193, for a savings of $148 per month.

In order to do the loan with no closing costs, we raise the rate a little to cover the costs. How much the rate increases depends on the size of the loan, but in most cases the loan will be just an 1/8 or 1/4 point higher. So with our example, if you could refinance at 4.00% with closing costs, let’s say the rate would be 4.125% with no closing costs. So the payment now goes up to  $1,211 per month, or $18 per month higher. The monthly savings are lower, but with no closing costs , you have no investment in the mortgage at all. This works especially well for people who don’t plan on being in their home or their mortgage forever.

No-cost refinances work best when the loan amount is higher. In many cases we can do a no-cost refinance for the same rate as other companies are doing full cost loans. Smaller loans, those under $150,000 are harder to do without any cost. The smaller the loan the higher the interest rate would need to be in order to cover all the closing costs. This won’t be the best route for everyone, but, depending on your situation, it could be a great option.

So, when will rates drop to 4.00%, or 3.75% or …?

This post has gone the long way around, but the best rate available to you depends on your own unique situation, what is happening in the overall economy and how that is reflected in the mortgage backed securities markets and how much you are willing and able to pay in order to get a low mortgage rate. If you want to see where you stand, and what we can do to give you the rate and program that best fits your needs. If I can help in any way, give me a call.

Peter Thompson                              630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Refinance

There were two major events last week which will have major impacts on the real estate market. The first was the release of the monthly unemployment  report Friday, which served as confirmation that the Fed will begin a new wave of quantitative easing next month. It wasn’t that the report was so bad. With 95,000 total job losses it was in line with what we have seen much of this year, and the private sector actually hired more workers than expected. But we are stuck in a spot where too many are looking for jobs and even profitable companies are afraid to add more without a real sign that the worst is over. The Fed is expected to begin goosing the money supply with an announcement at their next meeting in the beginning of November, by buying up treasury bonds and mortgage backed securities. In a way, they are cranking up the printing presses and hoping that this will effectively lower rates, bump up inflation and get the economy revving on its own. Mortgage rates have slid to a new low, and low rates will be with us for a long time. This should spark more interest in home buying, but with so much fear and uncertainty in the economy, too many likely buyers are still off on the sidelines. For those who haven’t refinanced yet, get your paperwork together. It’s time. Refinancing into a lower rate will save you thousands of dollars in payments. No one knows if rates will drop even lower. When the Fed makes the official announcement, or when the new money actually starts to flow rates could drop lower. But market wisdom says to buy on the rumor and sell on the fact. This means the Fed’s expected action is already priced into the rates. My own feeling is that we have entered a new range, and rates will fluctuate, but they will remain in a low, low range. This is great news for many homeowners and home buyers.

The other big news from last week was the foreclosure moratorium from several of the nation’s biggest lenders. Bank of America, GMAC and Chase mortgage are among the big players who have announced they will temporarily stop  foreclosures while they access their processes and see how big of a problem they have due to the shortcuts they have taken to get the properties foreclosed. When times were flush, the big banks ran approvals through an assembly line. Documentation wasn’t much of a problem because they needed loans to fill their pipeline, and quality wasn’t an issue. It seems they are doing the same things on the foreclosure side now. Some bank employees were signing off on thousands of documents each week, which meant they were doing it automatically and not examining what they were signing. One man in Florida was foreclosed on, even though he bought his house with cash and didn’t have a mortgage. While a pause in foreclosures will help some distressed homeowners stay in their homes a while longer, this throws another wrench in the housing recovery. The market can’t truly recover until the massive inventory of foreclosures are dealt with. Some analysts think this will be dealt with quickly and a way will be found to get the foreclosure express back on track. But others think this may just be the tip of the iceberg, and legal challenges could drag this on for a long time.

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            Chicago FHA Mortgages

The monthly jobs report is always the most watched indicator of strength in the economy, this month the focus has been more intent because this is also the last report before the Fed open Market Committee meats at the beginning of November. The reason for the extra focus is that the Fed has indicated that they are prepared to move forward with another round of quantitative easing, or pumping more money into the economy in an effort to shock the economy back to life. A good report showing higher than expected job creation would likely push this effort back into a wait an see mode. That didn’t happen. The BLS report showed a gain of 64,000 private level jobs, but this was offset by the loss of 159,000 government jobs (census workers and local government job losses), for a net loss of 95,000 jobs. The two previous month’s reports were also revised lower, and the unemployment rate stayed at 9.6%. This is nowhere near as bad as the hundreds of thousands of jobs lost each month throughout last year, but it takes about 125,000 new jobs each month just to make up for new people entering the market. So it is a bad report.  

The Fed meets next for 2 days on November 2nd and 3rd, and it is now expected that they will announce a program of quantitative easing. The concern of the economy slipping into a new recession (officially we are out of it) and the fear of deflation taking hold are now trumping any worries of inflation. With short term rates already set as low as they can go (the Fed Funds rate is 0-.25% to the big banks) the last big weapon in the Fed’s arsenal is the control of the money supply. Quantitative easing means the Fed is likely to start a program of buying back Treasuries and Mortgage bonds, to get more money flowing in the economy, and to drive down effective rates so that people are more willing to spend, or invest in new ventures rather than sitting with a minimal return. Mortgage bonds, and mortgage rates, have improved this week, and they may improve more now that there is confirmation that the program is coming. Rates are now as low as they have ever been, but this won’t help everyone. There are too many people who own homes and have comparatively high mortgage rates, but they can’t refinance due to tightened underwriting guidelines and loss of home equity. But there are plenty of people who will be able to take advantage of this. If you have been sitting on the fence waiting for the right time to refinance, or are thinking about buying a home but not sure if the time is right, it is time to get your documents together.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

Last week was mostly a holding pattern for mortgage bonds, and this week looks to be the same – at least until Friday when the monthly employment report is released. Mortgage rates have been in a range over the last few months, and though there was a lot of economic data issued last week, it was just enough to keep mortgage bonds bouncing around in the range. The Case-Shiller 20-city housing price index rose 0.6% in July after a 0.3% increase in June. This sounds like good news, but keep in mind, the index is based on a 3 month average, and we were still feeling the effect of the tax credit 3 months ago. A truer measure will be what happens to the index this month. The index is off about 29% from its peak. The consumer confidence index fell to 48.5 in September from a downwardly revised 53.2 in August. This is usually a good indicator of whether consumers are willing to spend more, or not. The Institute for Supply Management reported that the monthly index of manufacturing activity was 54.4 in September down slightly from August, but right in line with expectations. A reading above 50 signals expansion and this was the 14th straight month of expansion (whether it feels that way is another story).

But these were all minor issues, and traders attention is focused on the Fed, and looking for signs of what comes next. At their last meeting, the Fed announced that they were prepared to move forward with another round of Quantitative Easing (pumping more money into the economy through purchases of securities like treasury and mortgage bonds). If this is going to happen it probably won’t start until their next meeting in the beginning of November. In order to have justification, they are waiting for the next piece of really bad news. The employment report released this Friday is the next big test. The employment report is always the most anticipated piece of information for the markets. The consensus guess is that the number will be close to 0, with no new jobs gained or lost. But even 0 is a bad number since it takes about 120,000 new jobs created each month just to keep pace with those newly entering the job market. With millions unemployed or underemployed, even a small increase in jobs is tepid encouragement. If the number is read as bad, this will be fresh evidence that the Fed is going to go forward with their plan. If the news is better than expected, the markets will react, but the pot will be reduced to simmer and the wait will be on for the next bit of bad news. In the mean time, rates are holding at all time lows, and the odds are they won’t go much higher anytime soon.

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