Last month congress passed a bill which restored the temporary high loan limits for FHA mortgages. The news at the time was for the higher cost areas, but last week week HUD made it official and the higher temporary loan limits are now in place across the country and these higher limits  will be set until the end of 2012. This is good news for home buyers who are buying larger homes or smaller apartment buildings (2 to 4 unit buildings), since it allows these buyers to purchase with just a low 3.5% down payment, and it the more lenient qualifying standards FHA offers. It is also good for the housing market in general because more qualified buyers means a stronger and more robust market.

These loan limits were originally put in as part of the economic stimulus bill as a way to increase financing options and help stabilize the housing market. The higher FHA Max loan limits were extended beyond what they were originally called for, but expired earlier this year due in part to concern over the budget deficit. With the housing sector still soft, industry groups pushed hard for this extension.The max FHA loan amount here in the 6 county Chicago metropolitan area (Cook, Dupage, Lake, Kane, Will and Grundy Counties) is now back to $410,000 for a single family home.

Here is the table for the Chicago Metro Area:

The FHA max mortgage is determined on a county wide basis based on the areas median home values. In higher priced areas (mostly California) the max limit extends up to a high of $729,750. The floor in counties where higher limits don’t apply, is $271,050.

This applies not only to all FHA purchase loans, but also FHA 203k rehab loans and FHA refinances.

Here is a link to the HUD search tool which gives the FHA loan limits by County.

Free Home Buyers Guide

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 is no doubt that we are in a market where the home buyer wields the most power. There is more inventory of homes for sale than qualified buyers, so the buyer has more leverage, which usually means that the buyer can get a better price and terms when negotiating a purchase. This has been the rule, and in a market dominated by foreclosed and distressed properties, I am consistently seeing contracts come in well below the asking price, and usually with the seller paying for some or all of the closing costs. But I am now starting to see an odd new phenomenon – multiple offers on the same property. Multiple offers are usually a sign of a sellers market. A few years back at the height of the real estate boom, as soon as a sign was placed in the yard, a steady stream of buyers were there ready to buy. Homes were selling fast and multiple offers to buy the home were common. Back then, the most attractive homes in the nicer neighborhoods were getting the most interest and generating bidding wars, but nearly everything was selling.

The real estate market today is much different. The average time for a home to sell is much longer, and the focus of buyers now is not necessarily finding the best home in the nicest neighborhood, but finding the best bargain. The properties that are generating multiple offers today are homes that are priced below other similar homes. A lot of times this is a strategy on the listing Realtor’s part to separate their listing from all the others on the market and create an auction atmosphere. By starting out low they can often get more interest from buyers, more bids and with the competition to buy the home can often sell faster and for more than it would otherwise.

If you find a home that is getting a lot of interest and it looks like you will be competing with other buyers, here are some things to think about and tips on how to make the best of the situation:

Is it a short sale, or a foreclosure? These properties are most likely distressed, but there is a big difference between a short sale and a foreclosure. With a foreclosure the bank already owns the home and has agreed to sell at the listing price. A short sale is more complicated. Another way to look at short sales is as pre-foreclosures. The owner is trying to get out of the home and sell it for less than what they owe on the mortgage. This means you have to go through two steps – getting a contract together with the owner, and then having the contract approved by the bank that holds the mortgage. Sometimes short sales are priced too low, and at a point where the bank won’t approve it.

Is this really the right house for you? A funny thing happens when people get involved in a bidding war. Emotion takes over and many buyers are determined to do whatever they can to make the winning bid. If this is the right home for you and the value is there, that can be the right decision. But if you get carried away in the moment and agree to terms that are more than you want, you may regret it when the seller says yes. As the intensity heats up, take a step back and make sure that this is the right home for you.

Have your Realtor put together a market analysis for the home. The property has to be priced well in order to generate excitement, but as buyers compete the asking price may rise significantly above what you start out at. With multiple offers the first bid is often followed by a request that all the bidders come in with their highest and best offer. If you are intent on winning the bidding contest, you may end up paying more than you expected. A good Realtor will help you see what the real value of the home is and what the best strategy is for you to buy, and help you make a decision of if it is better to walk away.

Homes that generate multiple bids are a good sign for the market, but this is still a buyer’s market. As a home buyer you have a lot to choose from. Make sure that the home you buy is the right one for you.

Free Home Buyers Guide

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

Now that the election is over, the 2nd installment of Cook County real estate tax bills are now out. The tax bills are due to be paid next month, and this is sure to dampen some home owner’s holiday spirit. Especially when you consider that the first installment of the 2010 bills will be due just a few months later.  Home values have gone down sharply over the last few years, but the accessed values aren’t going in the same direction. No one wants to pay extra for taxes when their values are down, but with local governments in a cash crunch, they aren’t in a sympathetic mood.

Our real estate tax system is complicated and there are a number of factors that go into calculating the tax bill. The first thing to do is to check your bill and make sure you are getting all the correct exemptions. If you are not getting your homeowners exemption this could make a big difference. But one of the major factors is the accessed value. If you can show that the accessed value is higher than the current market value, you may be able to get your tax bill lowered. There are attorneys and specialists who do this regularly and charge you a percentage of the taxes you saved. Or you can do this yourself.

If the property was purchased within the last 3 years, the assessor will base the new accessed value on the sale price. This might not help you if you bought when the market was still moving up, and now it is down from what you paid. If you have owned the home longer, your accessed value will be based on what comparable homes have sold for recently.

Here is the link to what you need to do to appeal your property taxes in Cook County.

Here is the online Cook county residential property tax appeal form.

Tax appeals are handled the same way in all of the Chicago area collar counties.

Dupage County property tax appeal process.

Kane County property tax appeal process.

Will County property tax appeal process.

Will County tax appeal forms.

Kendall County Assessors Office

Lake County property tax appeal process.

McHenry County property tax appeal process.

Peter Thompson                              630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

If you are buying a home or refinancing your mortgage in Cook County, expect to pay some extra cash at closing to set up your tax escrows. Real estate tax bills come out twice a year. The first installment (which pays for the first 6 months of the previous year) was due in March and the second installment (for the second half of last year) was supposed to come out in September. But in Cook County these dates are suggestions, not real deadlines. I can’t remember the Cook County tax bills ever coming out when they were supposed to, and this year it looks like they will be out later than usual. Cook County Treasurer Maria Pappas says that she expects tax bills will be mailed out the week of November 22nd – almost Thanksgiving. The reason the bills are extra late this year may be political. Even though home prices are down, tax increases are expected (the increase is shown on the 2nd installment). If the tax bills came out before the election on November 2nd, this would be a big issue. Holding it back may make political sense, but it means that anyone transacting a mortgage and escrowing their taxes will have to cough up extra money at closing. Lenders all count on the tax bills coming out at the proper time, so when they aren’t the title companies build in a big reserve to insure they have collected enough, even if the tax bills are much higher than before. This is called TI, or Title Indemnity.

With TI, the title company holds back an amount over and above the previous tax bill to allow for tax increases, and guarantees the lender that they have collected enough to fully fund the new escrow account. Most title companies will collect one and a half times the current tax bill and they will charge a fee ($150-$200, usually) to hold onto the taxes and pay them once the bill comes out. Once the bills are out, any money left over will be returned to the borrower. So this isn’t an increased cost (except for the fee) but it is a real hit to cash flow, and for borrowers who are short on cash anyway, it is a real hardship.

Last year the Cook County tax bill came out in October. Delaying it for an extra month means a lot more cash needed at closing. If you are refinancing your mortgage and have an escrow set up now, this means you will have to fund the new account, and will then get paid back from your current lender after closing (this is usually done within 30 days). If you are buying a new home it isn’t quite as bad because you will get a credit for the unpaid taxes from the seller, and you will normally get more back in the credit than you need to set up the new escrows. Either way, it means more cash at closing than any other time of the year. I’ve worked with homeowners who needed to get gifts to come up with the extra cash. Again, this is a cash flow problem, not an extra cost, and you will get money back from the current lender (if it is a refinance) and the title company once the bill is out. Closings will be a little easier and more affordable once the bills do come out.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

In the mortgage business, there is always anticipation around this time of year as we wait for the new loan limits to be announced. I know, as far as excitement goes this is up there with waiting for the new phone book to come out. But this year the drama was a little more pronounced. The conventional loan limits (the maximum loan that will be insured by Fannie Mae and Freddie Mac,) have stayed the same for the last several years, and with home prices soft the betting was that they would stay the same again this year. And the betting on that count was right. The maximum loan for a single family home here in the Chicago area and throughout most of the country stayed the same at $417,000. In high cost areas (Hawaii and parts of California, mostly) the max loan limit actually went down. Earlier this year loan limits were raised in these high priced areas in order to help the real estate market and take up the slack as many Jumbo lenders stopped making loans. The Max mortgage in the high priced areas was $729,950, after the first of the year it will be going down to $625,500.

The conventional limits as of January 1st will be:

          General                         High-Cost 

1Unit           $417,000                        $625,500

2 Units        $533,850                        $800,775

3 Units        $645,300                        $967,950

4 Units        $801,950                        $1,202,925

The bigger uncertainty and anticipation was what would happen with FHA mortgages. Earlier in the year FHA raised their limits temporarily to $410,000 for a single family home. FHA used to be just a little slice of the mortgage market, but this year, partly because of the increase in loan limits and partly because of tightening conventional standards, FHA has become the number 1 choice for the majority of home buyers. Everyone expected that the FHA loan limits would go down, the question was how much. We now have the answer. Here in the Chicago area the max FHA loan for a single family home will be $365,700. This is based on 115% of the median home price in the area. Nationally the lowest max mortgages will be capped at $271,050 and in high priced area the loans are capped at $625,500 for a single family home.

Here are the FHA limits for the the greater Chicago area which includes Cook County, Dekalb County, Dupage County, Grundy County, Kane County, Kendall County, Lake County, McHenry County and Will County: 

1 Unit        $365,700

2 Units      $468,150

3 Units      $565,900

4 Units      $703,250

In other areas where 115 percent of the median house price is less than 65 percent of the Freddie Mac limit (which includes most of Down State Illinois), the FHA limits are as follows:

1 Unit       $271,050

2 Units      $347,000

3 Units      $419,400

4 Units      $521,250

Here are the limits in higher priced areas:

1 Unit        $625,500

2 Units      $800,775

3 Units      $967,950

4 Units      $1,202,925

If you are looking for a loan in a higher priced area, or if you are thinking FHA and your loan will be above the new limit, you might want to act fast. The old guidelines are good for mortgages that are entered into the system up until the end of the year. After that you will be subject to the new limits. If you have questions on the max mortgage for a specific location, give me a call.

Illinois Mortgage Rates and News                              First time buyer loans

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Cook County tax bills were sent out last week, and for a lot of homeowners the bills were a big surprise – and not in a good way. My phone has been ringing with home owners wondering how their taxes moved up so sharply. Home values have trended down over the last few years, but accessed values have moved up, in some cases by a lot. The problem is that properties are re-accessed every 3 years (each township rotates so they are not all done at the same time), and this year the re-assessment comes at a time when legislation has phased out some tax caps, so the result is a spike in tax bills while the value of their home is lower.

The real estate tax system is complicated and there are a number of factors that go into calculating the tax bill. The first thing to do is to check your bill and make sure you are getting all the correct exemptions. If you aren’t getting your homeowners exemption this could make a big difference. But one of the major factors is the property’s accessed value. If you can show that the accessed value is higher than the home’s real value, you may be able to get your tax bill lowered. There are attorneys and specialists who do this regularly and charge you a percentage of the taxes you saved. Or you can do this yourself.

If the property was purchased within the last 3 years, the assessor will base the new accessed value on the sale price. This might not help you if you bought when the market was still moving up, and now it is down from what you paid. If you’ve owned the home longer, your accessed value will be based on what comparable homes have sold for recently.

Here is the link to what you need to do to appeal your property taxes in Cook County.

Here is the online Cook county residential property tax appeal form.

Tax appeals are handled the same way in all of Chicago’s collar counties.

Dupage County property tax appeal process.

Dupage County tax appeal forms.

Kane County property tax appeal process.

Will County property tax appeal process.

Will County tax appeal forms.

Kendall County Assessors Office

Lake County property tax appeal process.

McHenry County property tax appeal process.

Illinois Mortgage Rates and News

The real estate market has had more than its share of bad news lately. Home prices are down, foreclosures are up and the outlook for the future is more of the same. From a big picture view the real estate market is miserable. But I’m seeing some signs here in the Chicago area that we may not have turned the corner, but we may be a lot closer than most people think. This isn’t a scientific account of what is going on, it is simply an anecdotal look at what I’m seeing in the market right now. I’m not sure what exactly is causing this, maybe it’s a result of the new housing bill, or maybe it’s just the realization from home buyers that there are bargains to be had, but the real estate market here in the Chicago area is active. Here are some “trends” I have noticed:

1. Properties are selling – August is normally one of the slowest months for selling real estate here in the Chicago area. This is the month when people are taking their last minute vacations, getting their kids ready for the new school year, or just enjoying the end of the summer. Most years home buyers take the month of August off. It’s no fun spending the day climbing in and out of a Realtor’s car when the weather is so hot. But that’s not the case this year. Buyers are writing contracts, and a lot of these contracts are coming together. I know because my phone is ringing and I’m busy putting together loan packages at a time when I expected to be able to put my feet up on the desk and take it a little slower.
2. Realtors and home sellers are pricing homes to sell – Any time that the market changes, it takes people a while to recognize it. This is especially true for the real estate market where the changes happen slower and are invisible for all but the most attentive consumers. The market a few years back was white hot. Most home owners didn’t buy a home during that time, but they saw the high prices homes in their neighborhoods fetched, or maybe refinanced their mortgage with a value higher than they expected. It is those prices they have in mind when they go to sell. Or it has been until lately. Realtors are now pushing harder for realistic (lower) listing prices, and home owner’s who want to sell rather than just have a sign in the yard for the next 6 months, are listening to them. So listing prices have come down by a lot.
3. Home buyers are getting realistic, too – There is no question that this is a buyer’s market, but for too many potential home buyers that meant offering a ridiculously low price and then being surprised when no one bit. It is a buyer’s market, and this means home buyers are getting good prices, and often seller concessions (money from the seller to pay for closing costs, for example), but this doesn’t mean that home sellers are giving the house away. I’ve seen quite a few buyer’s who wasted months trying to buy short sales or foreclosures where the lender never even responded, who ended up buying homes that fit their needs and were good deals, maybe even bargains, though not outright steals.
4. Home buyers and consumers are adjusting to the new lending rules – There is no question that it is harder to get a mortgage now than it was a year ago. The tighter financing rules have taken some potential home buyers out of the home buying pool. But financing is available, and there are options for many if not all potential buyers. This was a shock when lending guidelines first started to tighten, now it’s the new normal.
5. Realtors are worried about appraisals – Over the last week I have had 3 conversations with Realtors who were concerned that the offer they were getting on their listing was too high and that they were worried that the property wouldn’t appraise out. This is not the way Realtors normally think. Realtors want to get the highest possible price for their listings, and figure that the details will all work out on their own. To me this says two things: one, that the market is stronger now if offers are coming in high, and two, Realtors are now not only realistic about the market but have a healthy dose of fear, too.

These are again just observations, not hard data, but I think the truth is more complicated than the bleak headlines show. Real estate is different from market to market, and the headlines lump the stronger areas in with the areas with the biggest declines. The market here in the Chicago area is not booming, but it was never as hot as the bubble markets like California, Nevada and Florida, so it makes sense that it would never go down at the same rate.

What we are seeing is a balancing out of pent up buyer demand and sellers who are motivated to sell. The market over all is slow, but some homes are selling quickly. I’m told that about a third of the homes listed are sold quickly, many within the first month. These are the homes that show well and are priced right. Other homes are selling later, usually after price cuts to bring the listing price down closer to the current market. And some homes, because of both condition and price, are going to be on the market for a long time before they sell, if they do at all.

Over the next months we will see if this is a boomlet or a long term trend, but right now the market is active.

The Housing Bill – The Housing and Economic Recovery Act of 2008 was passed by the Senate on Saturday and is expected to be signed into law sometime this week. The bill will actually take effect on October 1st. There have been a lot of rumors as to how this will shake out, but these are some highlights of what has been agreed to and will be in the new bill:

• A bailout of Fannie Mae and Freddie Mac, raising their debt ceiling and authorizing the government to purchase their stock as needed in order to keep them afloat. They are also now subject to more regulation than in the past.
• Foreclosure relief for some homeowners who bought in the last few years. The lenders have to approve it, so in a way this provides an option for a short-refinance. It will only work if the lender goes along with it and the borrower will have to split their equity with FHA if they sell their home for a profit at some point down the road.
• FHA will raise their minimum down payment from 3% total investment to 3.5%.
• FHA will eliminate the down payment assistance programs or DPAs (Nehemiah and AmeriDream) which allowed seller concessions to be used as a way for home buyers to buy with no money down.
• A 12 month moratorium on the FHA risk based pricing, which just went into effect 2 weeks ago.
• A tax refund of up to $7,500 for first time home buyers – but this will have to be paid back over the next 15 years, so it more of an interest free loan than a refund.
• A streamlined approval process for FHA condos.
• The maximum loan limits for both Conventional and FHA financing will change based on the median home price for the area, it’s still not certain what it will be here in the Chicago area.
• A nation wide licensing system for loan originators – we already have this in Illinois.

Some of this is going to be good for the market, but things like increasing the minimum FHA down payment and doing away with the down payment assistance programs will make it harder for otherwise qualified people to buy. There is talk that a separate bill will try and resurrect the DPAs, but once they are gone it will be harder to bring them back. If you are looking to buy a home here in the mortgage chicago il area and you lack the down payment, this may be your best chance to buy. A Down Payment Assistance program combined with an FHA loan is still a way to buy with no money down, but you will need to close by September 30th.

There is a lot more in the bill – it is over 700 pages long. A lot of what this means will be open to interpretation and clarification down the line. I’ll keep you informed as I hear more details.

Illinois Mortgage Rates and News

If you’ve been paying attention to the news, you know that the real estate market is tough. Homes are taking longer to sell and selling for much less that they would have just a year or two ago. Many of the Realtors I speak with are still making their adjustments to the new market and trying to find new ways to generate a paycheck. I met with one Realtor last week who offered me the chance to get in on the ground floor of a multi-level marketing program he was considering. But the market isn’t bad for everyone. As two news stories from last week show, with a little bit of luck and ingenuity real estate is still a winner.

Flipping houses for a profit is harder to do than it was in the past, but Donald Trump managed to eke out some coin when he sold a Palm Beach property, Maison de l’Amitié, for a reported $95,000,000. Trump had been bragging that the sale was for $100 million, but according to the Palm Beach Post last minute negotiations brought the price down when Trump agreed to pay the closing costs (seller concessions work, even at the top price range). The buyer was a Russian billionaire and the price he paid was the highest sale price for a single family home in the United States (though I’m sure a few families could comfortably live there). Trump bought the home for a little over $41 million in 2004. Not a bad profit. As Trump himself told reporters, "I love breaking records, and this is a record. In an age of so many people getting hurt in real estate, it shows that you can still do well in real estate.” I’m not sure what the moral is here, that the rich get richer, or that if you are selling your home you might want to let some Russian billionaires know about it.

The other story was much closer to home, in Lake Bluff, Illinois. This story concerns another real estate developer, George Michael, who was intent on finding ways to lower the costs on his property. One of the biggest costs associated with real estate is real estate taxes. According to the Chicago Tribune, Mr. Michael creatively decided to reduce his expenses by cutting his tax bill to zero. He did this by converting his $3 million dollar lakefront mansion into a church for a tax savings of $80,000 per year. The church, the Armenian Church of Lake Bluff, isn’t open to just anyone. There are no trespassing signs posted throughout the property and it is mostly family members in the congregation. His plan might not work long term, though. The village of Lake Bluff is saying the church failed to get proper permits and had no authority to change his home into a church. This one may end up in court.

Illinois Mortgage Rates and News

I’ve received 4 calls this week from home buyers looking to buy condos in Chicago and the Chicago suburbs. With more condos on the market than at any time over the last several years this is a great time to buy. This means there is more of a selection to choose from, and the competition is bringing condo prices down. This is a great time to buy a new condo, but changes in the mortgage market have made financing condominiums harder than it used to be. Mortgage guidelines have gotten much tougher and mortgage insurance companies are even tougher. Fannie Mae and Freddie Mac have junked their declining market policy, but the mortgage insurance companies have kept the policies intact. What this means is that in declining markets the mortgage insurance companies require an extra 5% down payment in order to take on the loan, so if you were going to put down 5%, you would now need to have 10% for a down payment. Chicago and the entire Chicago area are now listed as declining real estate markets. The net result is that if you are going to buy condo anywhere in the Chicago area, and you are going for conventional financing, you may need a 10% down payment.

These new requirements are going to make it harder to finance Chicago area condos, but there is one way you can still buy with a minimal and in some cases no down payment. FHA financing allows a 3% down payment and this money can come from not only your own funds, but a gift from a relative or a grant from a down payment assistance program (at least for now). There’s only one catch. When you buy a condo with FHA financing, the condo needs to be approved by FHA. There are a lot of condominium complexes and buildings that are FHA approved, but most of these are older properties. Many of the condo units have been built or converted to condo in the last 5 years, and during this time FHA was looked at as a dusty old program with loan limits too low to even worry about. So the developers never applied for the FHA approval. But things have changed since then. The FHA loan limit in the Chicago metropolitan area has been raised to $410,000, and FHA now is able to approve more buyers than any other program. If you are looking for a condo the first thing you should do is to see if the property you are looking for is already FHA approved. There is a HUD web site where you can search for properties by address and zip code, to see what is already approved. If you have a question or want to see what FHA condos are available in your town, contact me illinois Mortgage Company first time home buyers loan and I’ll be glad to run the search. IF you are interested in a property that isn’t on the list, there is another option. FHA offers a way to approve condos units one at a time with a spot loan.

FHA spot loans are designed to make FHA financing available to home buyers in successfully run condo buildings which have not gone through the approval process. From the FHA guidelines, the following requirements must be met to approve a spot loan:

• The condominium project must be complete, including all common areas and facilities.
• Control of the common areas must have been turned over to the homeowners
• association for at least one year.
• The owners association must provide evidence that the project has the appropriate
• hazard, liability and flood insurance.
• Individual units in the project must be owned fee simple. The project’s legal documents must provide for undivided ownership of common areas by unit owners.
• The project’s documents should not place any legal restrictions on conveyance. Any provisions that seek to limit the free transferability of title is unacceptable. Such restrictions include rights of first refusal and restrictive covenants.
• At least 90% of the units in the project must have been sold.
• At least 51% of the units in the project must be owner occupied.

• No single entity may own more than 10% of the units in a project. The 10% restriction does not apply when the ownership of less than three units would disqualify an otherwise eligible project. The Department recognized that the 10% cap on the number of units that may secure FHA insured mortgages in a given project can place a small regime at a disadvantage, since only a few units will invoke the limit. Accordingly, a two tiered system was established. For condominium projects having more than 30 units, no more than 10% of the units may have FHA insured loans at any given time.

First Time Home Buyers Loan | Chicago FHA loans

Condominium projects consisting of 30 units or less, can have up to 20% of the units encumbered by FHA insured mortgages under the spot loan rule.

It’s up to the mortgage lender (that would be me) to gather the correct documentation to show that the condo project meets all the eligibility criteria. Once we have all the documentation this would be submitted to the underwriter along with the rest of the file. Putting together an FHA spot approval takes a little more time and effort, but it allows home buyers to buy a condo they couldn’t buy with a conventional loan. In this market it may be one of the best tools available, for condo buyers and sellers alike.

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Illinois Mortgage Rates and News