Whether you are a first time home buyer or looking to move up, buying a home is a big decision, and not one to take lightly. One of my missions with this blog is to help people make the best decisions possible when buying a home or taking on a mortgage. I do this regularly through the information on this blog, and through my free Chicago home buyer’s guide – the Real World Home Buyers Guide (just click to download – it’s 55 pages of information and you don’t need to give up your email to get it). I get a lot of great comments about how helpful this is, and how knowing how the process works, and what to expect when buying a home or getting a mortgage, takes the stress out of buying a home and getting a mortgage at the best terms possible. We are now putting together a Chicago Area Video Home Buyer’s Guide which will break down this guide into short video segments.

The Chicago Video Home Buyers Guide will be released one segment at a time over the next few months. With this first installment we start at the beginning – Why would you want to own your own home? This is the first of three segment discussing the financial benefits of owning, and in this segment we cover equity build up, or how you can increase your equity or ownership interest just by paying down your mortgage. Let me know your thoughts. Thanks for watching, and I hope this is helpful.

Free- Home Buyer’s Guide

You can trust in us to get the job done right.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

As part of the new FHA condo approval process adopted earlier this year, all condominiums on the FHA approved list had to go through a recertification process to make sure they still met the FHA condo approval guidelines. The deadline for the recertification was this past week, December 7th. As it turns out, many associations didn’t even start the process until the deadline was almost on them. Part of this is the normal human tendency to procrastinate, and I’m sure another big factor was lack of communication and not knowing what to do or how to do it. But in today’s market, having an FHA condo approval is more important than ever. Mortgage underwriting is much tougher now than it has been in recent years, and if you are buying a condo it is even tougher. Not only do you have to qualify, but the building has to hit all the guidelines. Many mortgage insurance companies won’t insure a condo purchase without at least a 10% down payment, and conventional loans have a price hit when the equity is less than 25%. This has made FHA a bigger factor in the condo market than ever before. With FHA condo mortgages, you only need a 3.5% down payment, and the underwriting guidelines are considerably less stringent than with conventional financing. But in order to get FHA condo financing, the condominium project has to be on the FHA approved list. The re-certification process has now been extended, but the dates of the extension are staggered depending on when the condo project was first approved. The extension for the oldest approvals, those condos which were approved between 1972 and 1985, the extension is a short one, just through the end of the year. More recently approved projects have a little more time. 

If you are buying a condo in the Chicago area and it is not currently on the FHA condo approval list, this doesn’t mean the project can’t go FHA. The new FHA condo approval process allows all condominiums to be approved in one of two ways, directly through HUD (HUDRAP), or by a qualified direct endorsement FHA lender (DELRAP). Going through HD is likely to take some time. They have a lot on their plate, and re-certifying all the old units means a bigger backlog. But a lot of the new FHA condo approvals in the Chicago area are by passing HUD and being done directly through the lender as part of the mortgage approval process. In these cases, when a buyer submits the offer it is contingent on the property getting the FHA condo approval. The key to this is that the association has to submit all the paper work required, and this is done side by side while the borrower’s loan is going through the normal approval process. Once the project is approved for the borrower, it is added on to the FHA condo approved list, which means other borrowers can then buy in that project with FHA. In the Chicago area the FHA maximum mortgage is $410,000, so FHA isn’t only for low end properties. Having an FHA condo approval is now a big factor in making condo units more salable.

Here is the extension list based upon the original approval date:

1972 – 1980                                          December 7, 2010                 December 31, 2010

1981 – 1985                                          December 7, 2010                 December 31, 2010

1986 – 1990                                          December 7, 2010                 May 31, 2011

1991 – 1995                                          December 7, 2010                 July 31, 2011

1996 – 2000                                          December 7, 2010                 August 31, 2011

2001 – 2005                                          December 7, 2010                 September 30, 2011

2006 – 2008 (Sept)                               December 7, 2010                  March 31, 2011

If you have any questions about buying an FHA approved condo in the Chicago area, or what it takes to get your Chicago area condo project approved by FHA, give me a call.

You can trust in us to get the job done right.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

(Sorry this is out late – had internet issues.) William Goldman, the screenwriter of such hits as Marathon Man and Butch Cassidy and the Sundance Kid, made a famous comment about Hollywood and the folly of predicting which movies would hit it big – “Nobody knows nothing.” The same sentiment could be applied to what happens in the markets and the economy in general. A great example of this happened Friday after the release of the monthly employment report. Over the last few weeks, the stock market has climbed and bonds have been punished with the belief that the economy had turned the corner, and was on the brink of a rebound. The conventional wisdom now, was that inflation was the major risk now, not a slowing economy. But on Friday morning the employment report came out and it was absolutely miserable. The economy produced 39,000 new jobs and the unemployment rate increased to 9.8%. To add context, the experts were expecting at least 140,000 new jobs, and many were expecting a surprise on the upside with many predicting over 200,000 new jobs created. It takes about 150,000 new jobs each month just to keep up with new people entering the job market, and it will take consistently big numbers over a long period of time in order to bring the unemployment rate down, so the 39,000 jobs created is a step back and a very disappointing number. This is usually the economic indicator that is most important to the markets, and a number like this would be expected to send money rushing out of the stock market and into the safety of bonds. It didn’t. Stocks have been on a run because the new QE2 policy was was supposed to be good for stocks because the new money in the economy would pump up the economy, raise profits and add value to asset prices. The downside of this was the worry about inflation. After the employment numbers were released, the stock market surged again and bonds took more punishment (which means mortgage rates went up again). The rationality of this changed to the idea that with the number so bad, the Fed would need to pump even more money into the economy, allowing more room for stocks to grow. This fluid thinking allows traders to have their cake and eat it too.

Fed Chairman Ben Bernanke gave an extended interview to 60 Minutes Sunday night, defending the QE2 policy and the actions the Fed has taken since the credit bubble burst (the interview video is at the top of the page). Bernanke gave a very public defense of the Fed which has been under attack since the new program started. Some highlights – In the interview he stated that without the massive stimulus at the beginning of the financial crisis, the unemployment rate would be much higher, possibly in the 25% range. The economy is still fragile and we are not at the point where we can self sustain growth. High unemployment is likely to continue for the next 4 to 5 years. He also said that the critics don’t understand how the program works and that no new money is being created, this is a way to lower the effective interest rate. The risk of inflation is way overstated. The Fed is committed to the QE2 program, and if conditions warrant, it’s possible they could extend or expand it. The whole point of the interview was that we need to have low rates for an extended period of time in order to get out of this mess. The Fed is sticking to its guns. The question now is if, or when, the markets will fall in line.

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

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.

You can trust in us to get the job done.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

There are few things that are certain in life, but some things you can count on. Death, taxes and the fact that rents will go up, all make the list. Cook county just sent out their tax bills, and, as expected, even though home values were down, real estate taxes increased. Landlords don’t have the home owners exemption, so their rents have increased more. This puts pressure on landlords to increase their rents or find a way to cut more expenses. At the same time, home prices are down to the lowest level in years, and mortgage interest rates are near historic lows. This means that home affordability is better than it has been in years, and very competitive with the cost of renting. Not everyone who rents will be able to buy, but there are many renters who are qualified to buy and still sitting on the sidelines. For some, renting fits their life style better and they aren’t in a position where they want to settle down and buy a home. But there are others who continue to rent because they don’t realize they can buy, or, with conditions so uncertain, fear is holding them back. For these people, an increase in rent may be the prod to push them toward buying a home of their own.

There are a lot of reasons why renters think they can’t buy. Here are some of the myths that keep renters on the sidelines:

It cost too much to buy – I am continually amazed at how many people think they need a 20% down payment in order to buy. The truth is, you will need some money for a down payment, but not nearly as much as you think. With FHA you only need a 3.5% down payment, and all of this can be a gift. You will also need money for closing costs, but all of these can be paid for by the seller, if you put this into the contract (FHA allows up to 6% of the costs to be paid for with a seller credit, much more than you will usually need).

This is a bad time to buy – This is all about fear. These are uncertain times, and with the economy still fragile, many renters are worried about losing their jobs, or afraid they will buy too early and home prices will fall even further. No one knows what the future will hold. But in many ways this looks to be a great time to buy. With low home prices and the lowest mortgage rates in decades, this is a one-two punch which makes home buying more comparable to renting and the cost of ownership the lowest in years. We won’t know if this is really the best time to buy until we have a chance to look back, but often, the best time to buy is also the time when it seems the scariest. The combination of low home prices and low interest rates at the same time is not likely to last long term, and as the economy picks up, homes will become less affordable.

It costs a lot more to own a home than to rent – We have already talked about affordability and how owning is closer to renting. But to compare the full picture you need to look deeper than just comparing payments. There are several major advantages to owning real estate compared to renting. These include:

• Tax advantages – you can deduct the mortgage interest, taxes and in many cases the mortgage insurance from your tax bill. This is Uncle Sam’s way of making home ownership attractive.
• Equity build up – With most mortgages, you pay down your mortgage over time. This starts out slow, but evey payment you make means a little less interest paid and a little more equity in your home.
• Appreciation – This hasn’t been the case lately, but over time the odds are great that your home will increase in value as time goes by. For now we have to get out of the recession and the housing slump, so don’t count on this in the next few years. But in the long term it is hard to imagine that home values won’t go up.

The financial benefits of home ownership take time, but if you continue renting you know exactly where you will be down the road.

It doesn’t make sense to buy now since they don’t have the tax credit anymore – The tax credit was a great incentive, but most of the people who took advantage of this were planning on buying a home anyway. The mood of congress has changed, and worries about the deficit and spending are much more of a concern. It is doubtful that they will come back with any type of credit. But the lower prices and rates make up for the loss of the credit. Also, if you qualify, there are other programs that are worth much more. The MCC mortgage credit certificate program is a way for moderate income earners to get up to $2,000 extra as a deduction on their taxes, every year that they own the home (income and property values apply, but they are high enough to help many home buyers). This is a great long term program, and one that most home buyers have never heard of.

It is too hard to qualify for a mortgage – Mortgage guidelines have gotten tighter, but there are still plenty of ways to qualify. One big misconception is that your credit has to be perfect. We do have to show that you have a responsible credit history, but if you’ve had some problems in your past they won’t hurt you forever. If you would like to own your home but aren’t sure if you qualify, do your self a favor and talk with a good loan officer. You might be surprised to find you are in better shape than you thought. If not, a good loan officer can help you to find a plan to fix the problems so you can own a home.

We will see if more renters do take the plunge into home ownership over the coming months, but I expect it will be a lot. There are a lot of renters who are thinking of buying, but just waiting for the right time. The American dream is still to own a home of your own. Let me know what we can do to help get you there.

Free Home Buyers Guide

You can trust in us to get the job done right.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages