Is this the turning point we’ve all been waiting for? Is the economy finally starting to gain traction, and is this the start of a real recovery? Are the low interest rates we’ve gotten used to, really gone for good? This week seems like a turning point, but we won’t know if it is for months, at least. This could just be a head fake before we slip back into a downward trend. Or it could be the start of a slow, but meaningful recovery. Even if this is the real thing, we aren’t going to be on the fast track any time soon. Unemployment is still too high and the housing market is still on life support, so even though we are much improved from where we were a year ago, there is still a long way to go. But this does look like a turning point, and there is a lot going on relating to mortgage markets. Any type of recovery is good news, but it may be unwelcome for those who are still waiting to pull the trigger on a home purchase or mortgage refinance.

On Wednesday the Fed officially exited the mortgage backed securities market. Since December of 2008, when the financial markets were still on the verge of collapse and the housing market was as fragile as it has ever been, the Fed has been the back stop for the mortgage market. By buying up the extra supply of mortgage bonds (which are the basis for mortgage interest rates) they stabilized the market and kept home mortgage rates low. Over this time, the Fed spent $1.25 trillion to buy these mortgage bonds, and without this support the housing market would be in a whole lot worse shape than it is now. But this support has come at a price. First, of all, we will have to pay for this eventually, and the money spent on buying these bonds has come from a combination of taking on new debt and quantitative easing, which is another way of saying that the Fed printed up new money to pay for these bonds. Both of these actions can potentially lead to inflation (deflation was the bigger worry at the time, and is still a concern) and if inflation takes hold, this could be a bigger problem down the road. The other problem is that the mortgage backed securities markets grew used to having the Fed as their best buyer. This took a lot of volatility out of the market, and made the market more reliably predictable. It has gone back and forth in a set range for months. Now, even though everyone knew the Fed was exiting at the end of April, and they have been buying less and less over time, the market jumped higher as soon as they left. We will see over the next few weeks if this was just a nervous tick of a move, or the start of an upward trend. It makes sense that owning these bonds is riskier now without the Fed support, and interest rates have to go higher to make up for the increased risk. At the same time, the housing market still needs the support, and high mortgage rates could kill off any housing recovery. If rates swing too high, expect that the Fed will step in somehow, to keep rates affordable.

The other big news this week was the release of the unemployment report on Friday. This is always the most watched indicator, and a big sign of where the economy is heading. This report was different than others, though, because this report showed the economy adding jobs for the first time, in ages, and was the best report since March of 2007 (which is now looked at as when the recession actually began). The report showed 162,000 new jobs created, and the January and February reports were revised upward to show an additional 62,000 new jobs crested. The report wasn’t entirely rosy, though. The unemployment rate still stands at 9.7%, and those who are considered long term unemployed, who have been seeking a job for 27 weeks or longer, grew by another 4440,000 and is at a distressingly high level. Also, 44,000 of the new jobs were census workers, temporary government jobs. But temporary workers spend money, too, and there was strength in nearly all areas of the jobs report. The rate of unemployment is sure to stay high for a long time, but this does look like this is a real move in the right direction.

Mortgage rates popped about a quarter point higher last week, the biggest increase in months. Rates are still low, but the big question now is if this move higher is the start of an extended move or just a blip in the market. Experts have been warning for months that mortgage rates would have to go higher once the Fed withdrew its support, so I do think we have seen the last of the lowest rates. But the economy is still fragile, and everyone has a vested interest in keeping mortgage rates low. So I expect there will be sharper swings, both up and down, but I don’t think rates will go a whole lot higher for an extended period of time. We will see how this develops over the coming weeks.

Thinking of buying but not sure where to start?

First Time Home Buyer Webinar this is a recording of a webinar I did recently which goes over the entire home buying and mortgage process in just under an hour.

Free Home Buyers Guide – From A to Z, everything you need to know about buying a home and getting approved for a loan.

Peter Thompson 630-479-6424

It is looking like March Madness is about to give way to April If this was a basketball game, we would be getting close to the two minute mark. Desperation hasn’t set in yet, but you need to have a plan and you need to execute it quickly. There is just over a month left to find a home and get a contract together. You don’t have to close on the home by the end of April. You have until the end of June to get the financing together and close. So this is the time to take note of where you are and what still needs to be done to make sure you can take advantage of the tax credit.

The Home Buyer’s Tax Credit is broken into two parts, a tax credit of $8,000 (or 10% of the purchase price if under $80,000) for qualified first time home buyers, and a maximum tax credit of $6,500 for qualified move up home buyers. This isn’t the only reason to buy – home prices are the lowest in years, mortgage rates are still low and you can still buy with a low down payment. But if you have already made the decision to buy a new home, this tax credit is a kicker. There will still be a lot of good reasons to buy a home after the tax credit expires, but it is worth the effort to move up the search if you can get a check for buying now.

So, do you have a plan in place for getting a contract together by April 30^th? Here are some things to watch out for:

Have you been pre-approved for a mortgage?

This is the first step. Without a pre-approval you don’t know how much of a home you can qualify for, or what the best way to structure the purchase. If you haven’t done this, your next call should be to a good loan officer who can help point you in the right direction.

Are you working with a Realtor?

A lot of people start their home search on the internet. There are plenty of sites where you can search for homes, and this is a great way to get a feel for what is available. But when you are serious -and remember, we are at the two minute mark – this is the time to find a good Realtor who can help guide you into the home that is right for you. A good Realtor will save you time and aggravation, and will help you get a better deal.

It might be time to give up on short sales

If you have been looking for bargain properties and concentrating on short sales (homes selling for less than their mortgage balance where you need to get the bank to agree to take less), or if you have an offer on a short sale which has dragged on for too long, it might be time to cut and move on. Short sales take longer to complete, and until the bank holding the loan signs the agreement, you have no idea when, or if, the transaction will come together. (New rules on short sales go in place next month, but it’s still unclear how they will work).

Don’t wait until the last minute

A funny thing has been happening lately in the housing market. Homes are getting multiple offers. This means two or more buyers are bidding at the same time, which pushes the price of the home higher. This isn’t happening on all homes, but on homes in the first time home buyer price range it is becoming a common occurrence. If you wait until the close to the end of April, this is likely to be a bigger factor. Another thing to consider is the property condition. I’ve seen a lot of homes that went under contract but fell apart after the home inspection. If that happens it is discouraging anytime, but if it happens at the end of April, this means you don’t have time to find a new home before the tax credit deadline.

Are you a move up buyer?

If you are a move up buyer and need to sell your house first, the clock is ticking faster for you. If you don’t have your home on the market, priced right and ready to go, you may not be able to find a buyer before the April deadline. You don’t have to have a buyer for your home lined up before the April 30^th deadline, but it will make the process a lot easier and more certain if you do. One possibility if you are getting close to the deadline and still haven’t sold your home, is to write your purchase offer contingent on the sale of your current home. A lot of sellers won’t accept a contingent contract, but if you can show that your home is listed at a realistic price and is salable, this could work. You will still have to sell your home by the June 30^th deadline, but this does buy you some more time.

If you are already moving forward, know what you can afford and have an idea of what type of home is best for you, then you are probably in good shape. If you haven’t gotten that far, you need to play catch up, and that can be more stressful, but you still have time to find a home on time. If you don’t have a contract by the end of April, it’s doubtful that the government will extend the program again. But there will surely be a lot of great homes on the market, and it will still be a strong buyer’s market. There are sure to be bargains later in the year, but if you can get the home you are looking for and a check from the government too, this is a slam dunk.

Thinking of buying but not sure where to start?

First Time Home Buyer Webinar this is a recording of a webinar I did recently which goes over the entire home buying and mortgage process in just under an hour.

Free Home Buyers Guide – From A to Z, everything you need to know about buying a home and getting approved for a loan.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

FHA commissioner David Stevens made news last week when he announced that FHA would keep the minimum down payment at its current 3.5%. FHA critics have called for an increase in the minimum down payment up to 5%, but Commissioner Stevens told a congressional committee that raising the down payment would take out at least 300,000 buyers from the market, and mean a 40% reduction in loans, endangering the fragile housing recovery and putting the economy at risk. This statement wasn’t totally unexpected, but it is good news for anyone in the housing industry, and anyone who either owns a home or is in the market to buy a home.

FHA mortgages are one of the most popular loans on the market, accounting for about 40% of the overall mortgage market. Most of the home buyers now are first time home buyers who don’t have a big down payment saved up, and a good portion of the rest are move up buyers who ended up with less equity than they were hoping for. Coming up with the down payment has always been the biggest obstacle to buying a home, and for those who don’t have a lot saved up FHA is about the only game in town. But there has been a lot of hand wringing over the last year as critics of the program warned that FHA was the new version of Sub Prime, and a disaster waiting to happen. It’s true that FHA defaults are on the rise (still much lower than conventional defaults) but this is a function of the problems in the housing market and a high unemployment rate – not an indictment of the FHA program. I never understood why an increase in the required down payment would make the program that much safer. If home prices continue to fall, an extra one and a half or two percent increase in the down payment won’t make much of a difference. If someone loses their job the extra down payment won’t help them if they don’t have the income to pay the mortgage. Commissioner Steven’s has got it right. The people who buy with FHA have to go through the same underwriting process as anyone else, and the skin they have in the game is substantial compared to their means. Taking these buyers out of the market hurts not only them, but everyone else.

FHA upfront mortgage insurance rate increases in April

FHA doesn’t lend the money directly to home buyers; it acts as a mortgage insurance fund, charging fees to the borrower to protect the lenders from losses. Borrowers pay this mortgage insurance in two ways, an upfront payment that is usually financed into the loan amount, and a monthly mortgage insurance that goes on for at least 5 years. This money goes into the fund, and is used to pay off the lender if an FHA loan defaults. The FHA critics had one thing right. It is crucial to keep the program solvent and running. HUD still has a good margin the FHA reserve fund, and FHA has been self funded for the entire life of the program. But to make sure that they stay above water and don’t need a bailout, even if the economy worsens and the housing market dips again, they have decided to increase the required upfront mortgage insurance. The upfront mortgage insurance premium is now 1.75%. As of April 15^th it will increase to 2.25%, a half point increase, but again it is financed into the loan so it really means a slightly higher payment each month.

FHA financing will still be the best option for many borrowers. If you are planning on buying soon, and you are able to get your contract together and start the process in time that we can get an FHA case number before April 15^th, this could save you some money.

Thinking of buying but not sure where to start?

First Time Home Buyer Webinar this is a recording of a webinar I did recently which goes over the entire home buying and mortgage process in just under an hour.

Free Home Buyers Guide – From A to Z, everything you need to know about buying a home and getting approved for a loan.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

This week has been a good example of how volatile rates can be without really changing. There was a lot of movement in the markets, and a good deal of information was released which rocked the markets, first in one direction, and then in the other. But in the end it all amounted to nothing. Rates ended in the same range as they started (but it is a very good range to be in). The wild swings happened all week, but look at the activity just on Friday. First thing in the morning, February retail sales were up by 0.3% when the market expected a decline of 0.2%. This is a big swing, and though these numbers are subject to revision and can swing wildly from month to month, the markets took this as a sign that the economy was back in recovery mode, so mortgage bonds (which determine mortgage rates) took a dive. An hour later the University of Michigan Consumer Sentiment index numbers came in worse than expected (if consumers aren’t feeling good about the economy, they are less likely to spend their money), so the market swung back in the other direction. A little later Fed Governor Janet Yellen was named as the FED Vice Chairman, rates got worse again (because she is less hawkish on inflation than some of the other governors). But by the end of the day, these concerns were gone and mortgage bonds and mortgage rates ended the day absolutely flat.

So over the course of the week, and even over the course of a single day, the trading range range is tested and volatility is high. But this isn’t because the traders who push rates higher and lower by their buying and selling are subject to huge mood swings and change their mind on a minute to minute basis. This has more to do with the traders looking at each new piece of information released as a new opportunity, and as long as the rates stay in the same range, they profit from each trade, up or down. At some point something will happen which will change the consensus and either fear or greed will take over and we will move into a new trading range. For now, the range rules and even with the daily swings rates are remarkably stable.

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. Mortgage rates in other states may be slightly different, give me a call and I will give you an accurate quote for your particular situation. The conventional and FHA rates are based on the highest conforming loan amounts, which give the best pricing. Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me (Illinois mortgage company) and I’ll take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

(Another option is to break your Jumbo loan into 2 parts – conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

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 other day I wrote a post on how long it takes to close on a short sale, and the answer is that it depends, but it could take a long time. With the April deadline for the home buyer’s tax credit approaching fast, home buyers are wondering if they will have the same issues when they buy a foreclosed home. The tax credit has two components, first, the contract has to be written and accepted by the end of April, and second, the home has to close by the end of June. So the big question is, if you buy a home now, that is make an offer and get the property under contract, will you have enough time to get the financing wrapped up and the loan closed by the end of June. The answer here is yes, in most cases there will be plenty of time to close, even if you wait until the end of April before getting your contract together. But there are special issues you need to be aware of when dealing with foreclosed homes, and if you are better prepared, the process will go smoother and with less stress.

A foreclosure is a bank owned property. This means the bank (it could be the loan servicer, or it could be the end lender, like Fannie Mae, Freddie Mac or HUD) have already gone through the foreclosure process and the home is now a liability they need to get rid of. From the bank’s standpoint, the difference between a short sale and a foreclosure is motivation. A short sale is a potential problem. It may be in the banks best interest (it usually is) to negotiate and take a smaller loss with a short sale than to wait, and take a bigger loss. But the banks aren’t set up for these transactions, and a potential loss isn’t near as motivating as a big loss that is already on their books. By the time a foreclosed property hits the market, the bank already knows how much the property has cost them, they know what condition it is in and an idea of the range in market value. By the time the foreclosure is listed for sale, it is an old problem where the bank has already sunk money into it, and someone at the bank is assigned to sell the property. At this point they are ready and able to make a deal. So with a motivated buyer and a motivated seller, the home should be able to close quickly, right? Not necessarily. There are a number of land mines common with the sale of foreclosed homes which take extra time and may delay the closing.

Things to watch out for when buying foreclosed bank owned properties:

Condition of the property – This is the big one. Foreclosed properties are sold “as is”. This means the bank is selling the home in its current condition and they will not make any repairs to the property. This is usually the biggest problem with foreclosures, but also a big reason that they are priced so low. This means that you need to do a thorough home inspection so that you know everything that is wrong with the home, and an idea of how much it will cost to fix it. But this brings up another problem. If repairs are needed, most loan programs (both conventional and FHA) will require that the repairs are done and the home be in good shape before you can close. The problems with foreclosed properties can range from minor to the need for a full rehab. But even if the work is minimal, don’t expect the bank to do the work, they won’t.

So if any repairs are required, it is up to you to get them done. There are two options for this:

1. Do it yourself – If the repairs are minor, many home buyers are doing the work themselves, before the close and before they own the home. If you ask any good real estate attorney what they think about this, they’ll tell you it’s crazy and you are taking a big risk. And they’re right. But this is done all the time, and when the repairs are relatively minor the risk might be worth the reward since spending a little now could save a lot later.

2. FHA 203k Rehab Loan – This option is best for any situation where there are more extensive repairs. With the FHA 203k loan you can buy with a low 3.5% down payment, just like with any other FHA financing, but you can include the cost of the repairs (or remodeling) into the loan amount. There is more work involved with these loans. In addition to approving you and the property, we also have to approve the work you plan on doing. We need to get a detailed contractor’s estimate, and the appraisal shows the value of the home as it is now, and what it will be once all the work is completed. Because there is more involved, it takes a little longer to close with an FHA 203k, expect 60 days, but it can be sooner. With these loans, the repairs are done after the closing.

Lack of responsiveness – One of the biggest frustrations when working with a foreclosed property is the lack of responsiveness from the bank. This is the classic hurry up and wait attitude. When the bank accepts the offer they will usually want to set a quick closing date. This makes sense, the quicker they can get the bad loan off the books the better. But often as part of the loan approval process, or whenever you need the bank’s sign off or approval, the clock starts to drag. It isn’t surprising that banks move slowly. Decisions are often made by committee or passed up the chain of command. Also, the REO staff at the bank is likely to be overwhelmed. They might have hundreds of properties they are responsible for, and only so much time in the day to deal with everything. So you could be waiting a while for them to respond. This might not make a difference if you aren’t on a deadline, but if you are planning on getting the home buyer’s tax credit, make sure you build in extra time, and don’t count on their meeting the closing date on the contract.

Lack of responsiveness often describes the listing agent in a foreclosure, too. The listing agent is the Realtor who is marketing the home for the bank. In a normal transaction, the listing agent acts as a liaison between the buyer and the seller. The problem (not in all cases) is that it is common for one agent to be responsible for up to 30 listings. This means they are spread so thin that they often don’t even return phone calls let alone help in moving the transaction toward the close.

Title issues – Another common problem with foreclosures is title issues. The title is the chain of ownership and guarantee that you own the property and no one else can claim the home after you close on it. In order to close, the new mortgage lender needs to prove that you have a clean title so they feel safe lending the money for the mortgage to purchase it. Each step of a foreclosure adds extra legal documents which need to show on the title. The bank handling the foreclosure is probably the servicer, not the actual owner of the property, and it is common to have the property transferred from one entity to another. All this extra paperwork means that it may take more time to sort everything out, especially if you are trying to get documents from the bank (see above).

Utilities – In order to close (unless you are buying with an FHA 203k loan where this is part of the repair estimate) the water, gas and electrical service all have to be turned on. Even something as simple as this can take extra time. If the utilities weren’t on when the home was appraised, we will need to do an inspection before closing verifying that they are on and everything is working properly. The bank holding the property won’t turn on the utilities until after you have full loan approval. Then it goes through the chain of command, while everyone else waits for something to happen.

Extra fees – Check the contract, but banks are now asking for the buyer to pay extra fees or to pay charges which are normally paid by the seller. I have seen cases where the buyer had to pay the state and county transfer taxes, even though these are traditionally considered seller paid items. These char5ges can add up to thousands of extra dollars for the buyer. But remember, everything is negotiable. If the deal is good enough it may be worth paying some of the seller’s costs or extra fees, but the bottom line is that the seller wants, and needs, to get rid of the home.

Penalties for not closing on time – The contract will also most likely have a clause requiring the buyer to pay a fee for everyday beyond the contract closing date. This is pretty logical. The buyer should have an incentive to make sure they aren’t dragging their feet and are working to get the home closed on time. But what happens when the delay is their fault?

The key to getting through the extra obstacles of a foreclosure, and getting it all done in time, is to work with experts who know the process and can help you steer clear. This means a good loan officer, a good Realtor, and a good attorney. You can find bargains with foreclosed homes, but be prepared to deal with some frustration and expect some bumps along the way. But the payoff can be worth the extra hassle.

Thinking of buying but not sure where to start?

First Time Home Buyer Webinar this is a recording of a webinar I did recently which goes over the entire home buying and mortgage process in just under an hour.

Free Home Buyers Guide – From A to Z, everything you need to know about buying a home and getting approved for a loan.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

This is a slow week in the mortgage market, and rates are unchanged, hanging in at very attractive rates. The last several weeks mortgage rates have been flat as the proverbial pancake. The markets have moved daily, but the range has held steady. Over the past week the employment report came in better than expected, which hit rates for the day, but they quickly bounced back. The stock market is strong, and today marks the anniversary of the bottom of the market last year. Since then stocks have climbed about 62%. The Fed has spent almost all the money allocated for mortgage bonds, and the program ends at the end of the month, either way. So it is still curious why rates are so low. The consensus view was that rates would start to rise in the first quarter. So whether the low rates are here on borrowed time, or not, they are here now, near the lows for the last year.

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. Mortgage rates in other states may be slightly different, give me a call and I will give you an accurate quote for your particular situation. The conventional and FHA rates are based on the highest conforming loan amounts, which give the best pricing. Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me (Illinois mortgage company) and I’ll take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

(Another option is to break your Jumbo loan into 2 parts – conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

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

Mortgage rates are flat today and holding their own even as we have a good day other states may be slightly different, give me a call in the stock market. The economic reports released over the last few days continue to be a mixed bag. Inflation continues to come in low, which is good news for keeping mortgage rates low, but there are also signs that the economy is gradually improving (or maybe a better description would be bottoming). In housing, residential spending was higher, a big surprise since this had been down for 9 months in a row, The inventory of homes on the market continued to rise, so no one expects a real pick up in new construction until the supply of homes stabilizes. Mortgage bonds continue to trade near the best part of their range, but the consensus is still that rates are likely to rise.

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. Mortgage rates in and I will give you an accurate quote for your particular situation. The conventional and FHA rates are based on the highest conforming loan amounts, which give the best pricing. Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me (Illinois mortgage company) and I’ll take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

(Another option is to break your Jumbo loan into 2 parts – conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

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 purchase market is suddenly hot here in the Chicago area, and one of the big reasons is because buyers are lining up to buy in time to take advantage of the home buyer’s tax credit. Home buyers have until the end of April to get their new home under contract, and they have until the end of June to close. So there should be plenty of time to find a home, get a contract and close by the end of June, right? Maybe. But it depends.

A major part of the market is now made up of distressed properties, that is, short sales and foreclosures. A lot of home buyers (especially first time home buyers) are focusing on these homes because buying distressed properties can often mean you are buying at a bargain price. Foreclosed properties are homes the bank has already taken back. They are vacant, boarded up and often in rough condition. It sometimes takes imagination to see the potential in these homes (I’ll have an article on this, soon). On the other hand, short sales look like any other home on the market, but the price is often much lower than comparable homes. But the asking price is just an opening in what could be a long process. I have worked with buyers who closed on a short sale in just over a month, and others who have waited over six months and still don’t have an accepted offer. Short sales are a big factor in the home buying market now, and I expect this will be a bigger factor over the next few years until the housing market stabilizes. If you are considering a short sale, make sure you know what is involved, and what you can do to help your position.

What is a short sale?

A short sale is a home where the owner owes more to the bank (or banks) than what the home is worth. These are often considered pre-foreclosed homes. Buying a short sale is a two-step process. The first step is to negotiate an agreement with the home owner. The second step (the harder one) is to get the bank to approve it. A short sale should be a win-win-win situation. The home owner is able to sell while avoiding a foreclosure, taking a lower hit to their credit rating. The buyer is able to buy a nice home at a lower than market price. And these transactions are in the banks interest too. They win by selling a home quicker and without all the legal costs of taking the property back. By avoiding foreclosure they also don’t have to deal with the property damage and marketing issues which can lead to big bank losses. But even though it is usually in the banks interest to work with buyers, the reality is more complicated. Banks are overwhelmed with short sale requests, and though they have staffed up over the last year, and they are getting government pressure to be more responsive, inertia and bureaucracy often mean that nothing gets done quickly, or efficiently. The bank that holds the mortgage is usually just a loan servicer. The actual mortgage is often held by Fannie Mae, Freddie Mac or could be part of a securitized pool of mortgages. The bank will need to follow these investor’s procedures. Also, the case manager is not a decision maker. They gather the information and then send it up the chain for the approval. Whether the bank will approve it, and how fast they will respond, is usually determined by how far the bank is into the process.

The Short Sale Process

When a Realtor lists a short sale home for sale (or the homeowner often does this before putting the home up for sale) they need to prepare a short sale package and submit it to the bank’s loss mitigation department. The bank will want to see all the financial information on the seller, including tax returns for the last 2 years, pay stubs, bank statements and a list of all the other debts. They will also require a hardship letter showing why the home owner can no longer afford to make payments on the home. The Realtor needs to put together an analysis of what the home is worth in the current market, and the bank will need a proposed settlement statement showing the costs of the transaction and how much they will net from the sale. In a perfect world, the bank would review this information and make a decision if it would work for them to take a short offer, or not. In the real world it is a little messier.

Here are some things to consider if you are thinking about making an offer on a short sale:

How short is the offer? If you are making an offer close to the mortgage balance, this means a smaller loss to the bank, and they should be able to jump through hoops for a quicker response. An offer much lower than what the bank is owed could still make sense, but they are more likely to weigh the offer, and let more time go by hoping they get another offer before responding.

Has the bank assigned a case manager to the file yet? This is crucial. If you are putting an offer on a property which doesn’t have a case manager, expect a long wait. The bank has to go through their due diligence, and if they are starting from scratch it could take a while.

Have there been any other offers on the property which went in for bank review? If the bank has had another offer they are often already moving on the process. I have been involved in some sales where the buyer came in and made an offer after another buyer had tried, and grown tired of waiting. These transactions moved much quicker. If there is a new buyer, this is a change, and the process is supposed to start over, but there is often more in place, so you are starting over from a higher level.

Is there a second mortgage n the home? If there is more than one mortgage on the home, expect more road blocks. The second, or junior loan, won’t get paid a thing until the first mortgage is satisfied. So if there isn’t enough equity to pay off the first mortgage holder, the second mortgage holder won’t get a thing. That means they don’t have a lot of motivation to sign off and could throw up issues so they make something off the sale.

How quickly do you need to close? If you are planning on taking advantage of the tax credit, you have to think hard about committing to a short sale. Again, it could be approved in weeks, or it could take months. Decide if the possibility of a better deal on the short sale is worth the extra wait and uncertainty.

If you are going to go the short sale route, make sure you do what you can to make your offer a success:

Do your home work – Find out what you can about the seller and their situation before making an offer. If you know what the situation is for all parties, you are in a better position to see if your offer is likely to come together.

Put in a time limit – The bank won’t necessarily abide by it, but if you make your offer good for only a set period of time you have more leverage and can get out of the transaction easier if it isn’t coming together.

Work with a Realtor who understands how the system works – If your Realtor has worked with short sales before, they will know more of what to expect and can guide you around the land mines. Check and see if the listing agent has done this before, too. Communication is the key here, and you want to make sure that someone is communicating with the bank and moving the process along rather than just sitting and waiting for them to respond. Being a squeaky wheel can be an advantage in getting these transactions closed.

Be prepared to walk if you don’t see progress – If you put in an offer months ago, and you are still waiting for a response, how much longer are you willing to wait? If you aren’t moving forward you aren’t likely to suddenly get back on track. At some point you need to move on to something with better odds of success.

Even when the bank approves the offer, you could still be in for a bumpy ride. There are all sorts of moving parts when working with a short sale, and when one thing changes it could set off a chain reaction of other changes. Short sales will be a fact of life until the real estate market and the economy are back on firmer footings. So I expect that the process will be streamlined and easier to handle over time. But for now, short sales do take extra time, But if you are in a position where you can wait, the rewards may be worth the extra effort.

Not sure where to start? replay of my

First Time Home Buyer Webinar

Free Home Buyers Guide

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company

The mortgage market is still in rally mode, and rates are near their lowest points of the year. Mortgage rates are determined by mortgage bonds which trade in a market similar to stocks or other commodities. Mortgage rates trend to move in the opposite direction of stocks. When optimism is in the air and the economic future looks bright, investors buy stocks and mortgage rates usually trend higher.  When fear is the dominant emotion mortgage bonds are more likely to benefit, because investors feel safer with a fixed return. Fear is in the air again, today. Over the last few weeks Greece was in the news as it looked like they were close to default. That crisis was band aided over, but now when people talk about Greek ruins, they are talking about the economy. Their credit rating was down graded yesterday, which means more trouble. Jobless claims came in slightly higher than expectations, which helps feed the fear. Another reason why the trend is for lower mortgage rates, is that Fed Chairman Ben Bernanke, in congressional testimony yesterday, said once again that rates will remain low for an extended period of time. But that talks about short term rates, not necessarily mortgage rates. The Fed has just over a month left on its bond purchase program, but for now that isn’t putting the hurt on mortgage rates. If you are looking to buy a home or refinance a mortgage, my guess is still that rates will be rising, so this is a time to take advantage of rates while they are still near the lows.

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. Mortgage rates in other states may be slightly different, give me a call and I will give you an accurate quote for your particular situation. The conventional and FHA rates are based on the highest conforming loan amounts, which give the best pricing. Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, or to get pre-approved for a mortgage, give me a call or contact me (Illinois mortgage company) and I’ll take the time to find the rate and program that is best for you:

Conventional loans up to $417,000

For Jumbo loans over $417,000

(Another option is to break your Jumbo loan into 2 parts – conventional to the limit of $417,000 and a HELOC or fixed second mortgage for the rest. The blended rate is usually much better than a single loan would be.)

FHA LOANS – 3.5% down payment – FHA Maximum varies by County

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

If you are thinking of buying a home soon, the clock is ticking. We are now just over 60 days away from the deadline for having your contract together for the $8,000 first time home buyer (or $6,500 move up buyer) tax credit. You don’t have to close your purchase by the end of April, you have until the end of June to get your mortgage and close. But, if you are planning on taking advantage of this credit, time is running out quicker than you might think.

Buying a home is complicated. That’s not surprising; after all, this is likely to be the biggest purchase of your life. If one home were the same as another, it would be easy enough to go out and buy a home in a weekend. Finding the right home takes more time and gets a little more complicated. And making sure you are ready and able to buy a home is the other issue. Is your credit good enough? Do you know where your down payment is coming from? Do you know what steps to take to buy a home and get approved for a mortgage? With time running down, you want to be sure you are prepared and able to get your home financed once you find the home that is right for you.

I recently put on a first time home buyer webinar- How to Buy Your First Home With a Low Down Payment – Chicago First Time Home Buyer Webinar – which covered the entire process of how to find a home and get a mortgage in a way that works best for you and your needs. If you are looking for information on how to get the process going, and make sure you are on the right track, this is a great place to start.

Here is the link:

First Time Home Buyer Webinar

The webinar is just under an hour long, and the feedback I got from those who attended has been that this was a great way to get the information they needed, and they felt more confident going forward. Here is some of what I cover:

Why this is the best time to buy a home in years, and the best time for years to come.

How to qualify for your $8,000 tax credit.

How you can avoid the big first time home buyer mistakes which can cost you thousands of dollars. 

What you can do to put yourself in the best position to qualify for a mortgage.

What lenders look for on your credit report, and what you can do to raise your scores and improve your credit

What you need to know before buying a condo in Chicago (or anywhere else).

How you can buy with a low down payment, and possibly no money out of your own pocket.

What you need to know about FHA, and why this is the most popular program for first time home buyers

The steps involved in buying a home, from start to finish.

First Time Home Buyer Webinar

There is a lot of information packed into this, and if you are in the market, or even thinking about buying a home, this is worth your time. Let me know if you found it helpful.

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage