A little over a month ago, the Fed started a rally in the mortgage backed securities market (which is linked to mortgage interest rates) by announcing that they are prepared to buy $500 billion dollars of loans in a move to drive mortgage rates lower. Yesterday they followed through on that promise and started to buy these securities. It looks like rates are dropping again.

If you missed the lowest rates we saw last month, you might have another bite at the apple. But the last time rates dropped, the best rates were only there for a matter of hours, and with lender’s web sites crashing under the volume, most people weren’t able to get the best rates. If refinancing your mortgage will lower your rate and help your financial situation, the best thing you can do is to get prepared ahead of time. If you have already gotten your documentation together and your file is in with your loan officer, you are in a much better position to take advantage of the situation.

If you would like a rate quote or if I you would like to see how refinancing would work with your situation, give me a call or send me an email. 

Illinois Mortgage Rates and News                     First time home buyer loans

  Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

With rates near an all time low, refinancing has become a big thing again. Now, when times are tight, lowering your interest rate and your payment can make a real difference in your family’s budget. Rates are great, but one of the big problems in this market is that a lot of people who could get the most benefit from refinancing their mortgage, won’t be able to. With the slow real estate market property values are down, which means more homes aren’t appraising high enough to qualify for the new loan. Credit standards are more restrictive and you will need to verify all your income and assets. But if you already have an FHA mortgage, none of these factors matter. FHA has one of the easiest and best programs for refinancing your mortgage, the streamlined refinance.

The FHA streamlined refinance is only available for borrowers who currently have an FHA mortgage (if you don’t, you can still refinance into an FHA mortgage, but it will be a fully documented mortgage). Because FHA is a government program, and its mission is to increase home ownership, they have designed this program as a way to make it easier for borrowers who are already paying their mortgage on time to lower their payments without going through the entire qualifying process.

There are two types of FHA streamlined refinance, one where you can add in all your closing costs and pre-paids, but it requires a new appraisal to show you have enough equity to support the new loan amount. The other is an FHA streamlined refinance with no appraisal. This program does not require a new appraisal (which makes a difference if your property value has gone down). You can still add closing costs and escrows into the new mortgage amount, but your new mortgage is capped at the amount of your initial loan.

Here are some of the features of the FHA streamline refinance:

• No credit qualifying. This is not credit score based and it is not even necessary to pull a full credit report. Your mortgage does need to be up to date, and current and we will look at your payment history over the last 12 months.
• No income qualifying. When we take a streamlined application, we don’t even look at your employment, income or debts. The logic behind this is that if you are able to handle your mortgage payments and other debt now, you will not have any trouble when the payment is lowered.
• The mortgage needs to be an FHA loan, and it has to already be insured by FHA (If the lender who made the loan hasn’t gotten the loan insured yet, you will have to wait until it is in their system).
• You can’t receive any cash at the closing.
• In order for the loan to be approved, you will need to show that this loan is helping your situation. This means a reduction in your payment by at least $50 per month.
• The actual closing costs on these loans are low, the FHA commitment fee and title charges are the only costs needed. With most of the streamlines I have done, we have paid these costs through the premium we receive from the lender, so the borrower isn’t paying it directly.
• With FHA there is always an up-front mortgage insurance fee that needs to be paid. Depending on when you bought the home, you may get a refund of a portion of the fee you paid initially. This works on a sliding scale. You will get a large portion of the fee back in the first year, but it is all gone by the end of the third year. If you get a refund it will be applied against the new fee, with the balance financed into the new loan amount.
• One other thing to keep in mind is that you want to close your loan as near the end of the month as possible. FHA, unlike conventional mortgages, charges interest on their payoffs on a monthly basis, not per day. So you will pay the same amount of interest if you close on the first day as you would on the last day. You still have to allow for the 3 day right of rescission, and in a market like this getting a title spot and closing within your lock term is more important.

FHA used to be a major loan option, but it all but disappeared for a number of years as all sorts of low down payment plans came out on the conventional side. With conventional loans tightening, FHA made a resurgence last year. This means that older loans will likely be eligible for streamlines with the appraisal, but most of the newer loans will be doing the loan without the appraisal. Even if there are no closing costs involved, when you close on a loan you will need to set up a new escrow account and pay interest to the end of the month. Some of this will be able to be added in to the new loan amount, but without an appraisal you are capped at the original loan amount. Keep in mind that you will skip your next month’s payment and get the money in your escrow account back from your current lender in the next several weeks after closing, so it will be a wash in the long run, but if you bought with the minimum down payment you will probably need some cash at closing.

The FHA streamlined refinance is a great deal for most borrowers, and a quick and easy way to take advantage of the low rates we can now offer.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

The Fed gave consumers an early Christmas present at their meeting yesterday. In an unprecedented move, they dropped short term rates down to a range of 0 to.25%. The Fed was expected to cut rates by a half a point, leaving some ammunition for future action. Instead, they went bold and cut the rates effectively to zero. This was a surprise, and an indication of how soft our economy is. But the real gift to consumers was the statement that went along with the rate cut. The Fed had already started a program of buying back mortgage backed securities and other long term obligations. In their statement yesterday they announced that they were going to expand that program and buy back more mortgage bonds, and do “whatever is necessary” to get the economy moving again.

Both the stock and mortgage backed securities markets rallied on the news, and mortgage interest rates dropped and are at their lowest level in decades.

So how will this news affect you as a consumer?

• If you have money in a savings account or money market fund, your return is 0%. Nothing. After expenses some funds may charge you for parking your money there.
• If you have a Home Equity Loan or credit card debt which floats with prime rate, your rate and costs will drop.
• If you own a home and have a mortgage, chances are refinancing your mortgage will save you money.
• If you are looking to buy a home, the lower mortgage rates just gave you the equivalent of a pay raise (As a first time home buyer you are also eligible for the $7,500 tax credit – this means a big pay raise).

The Fed’s goal is to make mortgages affordable and get the credit markets flowing again. Mortgage rates were low before, they are now unbelievably low. This means that even those who closed with historically low mortgage rates before, may have a chance to save money by refinancing again. The question I’m getting now is, how long will the low rates last? In their statement the Fed said they intend to keep rates low for an extended period of time. Some people think that with the rates this low and all the money being pumped into the economy, that we are setting the stage for inflation and higher interest rates down the line. That may be the case, but we are looking at least two years before that will happen. The economy is in a deep hole now, and the top priority is to fill the hole before we all fall into it. I don’t expect mortgage rates to rise soon, but there are still a lot of reasons to take advantage of the low rates now rather than waiting to see if they get even better:

• With home prices still spiraling down, we are seeing more appraisal value issues. The lowest home prices of the year usually happen in the winter months when fewer home buyers are out looking and the sellers are the most motivated. Any sales now will be comps tomorrow. If the value is too low this will hurt your chances of refinancing to a better rate.
• Mortgage guidelines continue to change. Even as the Fed tries to make mortgages more affordable, lenders continue to tighten their guidelines. If you can accomplish what you need to now, it probably doesn’t pay to wait.
• You know the old saying about a bird in the hand. No one knows what will happen to rates or when the low will be. If you are saving money now, it is worth doing. Most of the refinances we are doing now are no cost refinances where you are not paying any bank fees or closing costs. If the rates drop lower you can always refinance again without losing any money.

If you are thinking of refinancing or would like to see how a refinance would benefit you, or if or if you are getting ready to start looking at houses to buy, give me a call and I will let you know what we can do to help. And we should all be thankful that Ben Bernanke decided to play Santa this year.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

I’m thinking of refinancing my mortgage, but I heard that rates are going down to 4.5% soon. Should I wait?

This is a question I’ve been getting a lot lately. This was a leak from Treasury Secretary Paulson’s office a few weeks ago about a program they were supposedly  looking at. This program would apply to purchases only, so it wouldn’t effect refinance rates, but even for purchases this is more of a random idea rather than a well thought out plan. The President-elect’s team said they were not involved in any planning, so the chances of this actually coming out appear to be slim.

The thinking behind this goes something like this. In order to get the economy moving again, the real estate market needs to stabilize. If mortgage rates are low enough, more home buyers would be willing to buy homes. This makes sense, but the details are the problem. The government doesn’t control mortgage rates. Mortgage rates move up and down based on activity in the mortgage backed securities market. Traders buy and sell these mortgage bonds in order to hedge their own contracts and as a way of anticipating where rates will be in the future. In order to get rates to 4.5%, the Treasury would have to buy down the rate, the equivalent of paying points, and it would cost a tremendous amount to get the rates down. It then comes down to bang for the buck. Is this the best use of government money, to subsidize the rates for a small slice of home buyers, when there are so many other needs? My guess is that this plan is already dead on arrival.

The bigger question is will mortgage rates get down to 4.5% on their own? And the answer to this is, maybe, but no one knows. Mortgage bonds and mortgage rates typically move based on economic news and the prospects of inflation and the over all strength of the economy. To put it simply, bad news is good news for mortgage rates. Lord knows we’ve had plenty of bad news lately. But the situation has grown more complicated in the last year. Many large investors that used to buy mortgage backed securities have stayed on the sidelines staying away from anything that could be a risk. The spread between long term and short term securities is at a record high, as is the spread between mortgage bonds and treasury bonds. Rates could fall further, but the last two times that rates dropped, they bounced back up after a short time. The old saying is that a bird in the hand is worth two in the bush. If refinancing now would help your situation, it makes sense to take advantage of the opportunity now. If they drop lower later, you can always refinance again (especially if you do a no cost refinance, and don’t have to pay extra cash).

Can I refinance my first mortgage to a lower rate if I also have an existing second mortgage?

Yes, but it might not be as easy as it used to be. Whenever you have a second mortgage or home equity loan, we will need to get a subordination agreement from the lender. A subordination agreement says that the lender with the second mortgage will keep their lien in the second position, and not try and jump in front of the new first mortgage when the old loan is paid off. This has always been standard procedure with refinances, and it used to be an automatic that the second mortgage lender would grant the subordination. The lender would usually need to know the terms of the new first mortgage along with a copy of the new appraisal and title and often a check for $50 or $100 for their efforts. Some lenders were faster than others, but it was rare that a second mortgage holder would not allow the new refinance.

This has changed somewhat in the last year. With property values down in many areas, second mortgages and equity lines that looked safe before are now considered risky. If the homeowners are not able to make their payments, and the property has to be foreclosed, the first one to lose will be the second mortgage holder. This is a big problem with loans that were taken out in the last several years. When home values were climbing, second mortgage lenders got more aggressive, and it was common for them to make loans up to 100% of the home’s value. Now, these loans are under water, the property isn’t worth as much as the loans on the home. This means big losses for the companies that make home equity and second mortgages. As a result, many banks have stopped making these loans entirely, or have tightened their guidelines so that they will only make these loans if the home has a lot of extra equity.

Now, when these lenders get a request for a subordination agreement, they are not so anxious to grant it. Some lenders have stopped granting them entirely, but most are looking at the specific situation and seeing if the new loan will put them in a better position, or not. In order to get the subordination you will need to have a good cushion of equity. If you are thinking about refinancing and have a second mortgage or home equity line, this is one thing you or your loan officer will need to check on right away.

If I change jobs, will that hurt my chances of qualifying for a mortgage?

No, it shouldn’t make a difference if you are still in the same line of work and your income will be the same or better. There are a few things to keep in mind if you are going to change jobs, though. With some jobs you start out on a probationary period and are considered a temporary worker. If this is the case and the employment verification shows you are temporary, it will be a problem. Another thing to consider is how will you be paid? If you are paid by a salary and your income is the same from paycheck to paycheck, no problem. But if a big part of your income comes from overtime, bonus or commissions, and these aren’t guaranteed, this could be an issue.

If you plan to buy a new home in the near future and you are thinking of changing jobs, run the information by your loan officer beforehand, just to make sure this won’t hurt your chances of being approved for a mortgage.

Illinois Home Mortgage Rates and News             First time home buyer loans

                               Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

After the big drop in mortgage rates last week, we are in another refinance boom. Rates are near their low point for the year, and though they are bouncing around from day to day, this is a great opportunity to get your rate down and save some money. December is usually the time when the real estate market slows down as home buyers are more interested in Holiday parties and Christmas shopping than schlepping through the snow looking at houses. It is also the time when most of the mortgage support staff (appraisers, processors, underwriters and loan closers) catch up on their down time and take their vacation days before they expire at the end of the year. So it is almost a rule that the mortgage industry runs shorthanded in December. What this means is that a lot of people in the mortgage industry are going to be pulling their hair out trying to get extra work done with fewer people to do it. But these are good problems to have, and I would much rather have extra business than too much time on my hands.

Refinancing makes sense for a lot of different situations. Any one who bought a home earlier this year and has a rate over 6.0% is going to have a chance to reset the loan and lower their payment. If you have an adjustable rate loan and you want to fix the rate, this is the time to do it when the rates low. If you have equity in your home and too much consumer debt, a debt consolidation loan can save you hundreds of dollars each month. If you have an FHA loan, you can take advantage of the FHA streamlined refinance program where you don’t have to qualify for the new loan, you just need to show your mortgage is up to date. Depending on your situation, you might be able to do this without even getting a new appraisal.

So there are a lot of good reasons why you might want to refinance, but the problem is taking advantage of the opportunity and getting your loan closed as quickly and smoothly as possible. The surge in loan volume makes the mortgage industry look like a pig that’s just been eaten by a snake. With so much volume there are going to be glitches, and the process will slow down as support staff gets overwhelmed. I normally close refinances within 30 days, and I am trying to get as much as possible through the system and closed in December. But mortgages have a 3 day right of rescission (3 business days when the consumer can change their mind about going through with the refinance), and we have the Holidays off, so the loan will have to be approved and ready to close before Christmas to close by the end of this month. To take some of the stress off I’m locking my loans for a little longer, just in case.

If you are looking to refinance your mortgage, here are some things you can do to move yourself to the front of the line and get your loan closed quicker and with less hassle:

Be prepared to act fast – We’ve had two other rate drops this year, and both times the best rates only lasted a short time. I think there is reason to believe that low rates will stick around longer this time, but the market has been incredibly volatile and when we do reach the lowest rates, the lender lock systems are often overwhelmed with volume. When the time is right you need to act fast.

Get your paper work in on time – I’ve spent the last week calling past clients and letting them know it’s a good time to refinance. Once your loan is locked in, the clock is ticking. We need to get all your paperwork through and your loan closed and funded before the clock stops. Getting your paperwork in is the first step. If you hold on to the loan documents for a while before getting them back to me, that means wasted time. The longer you hold onto the paperwork the harder it will be to close your loan on time.

Send in a complete loan package – To close your refinance we will need documentation on your income, assets and work history. Your loan officer will give you a complete list for your personal situation. If you send back everything that is needed, this makes everyone’s life smoother. Some of the items we may need include:

• 2 years W2s (Full tax returns if you are self employed).
• Current paystubs for the last 30 days.
• 2 Months of your current bank statements and other asset accounts – all pages attached.
• A copy of your mortgage statement.
• A copy of your most recent tax bill.
• Copies of your driver’s license or other photo ID.
• If you have a home equity loan or second mortgage, we will need a copy of the note to subordinate the loan.
• The name and phone number of your insurance company.

There may be other things needed depending on your situation. Getting everything needed up-front saves time and aggravation.

Make yourself available for the appraisal – For most refinances we will need a new property appraisal. The appraisers are going to be the first group to be overwhelmed. If you can be flexible and allow the appraiser in as soon as possible, this will help with your loan timing.

Refinancing your mortgage can be a great way to save money in a tough economy. The process will go smoother if you are prepared.

Illinois Mortgage Rates and News                     First time home buyer loans

  Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

Over the last month, mortgage rates have been stuck in a narrow range. All the news coming out about the economy was consistently bad, which is usually good news for lower mortgage rates, but the bond market was stuck and rates didn’t budge. A big part of the problem has been lack of investor confidence,  even though Fannie Mae and Freddie Mac are now fully backed by the government. Over the last months since the credit crisis hit, the Fed and the Treasury have been trying to get mortgage rates down. In order for the economy to recover, housing has to recover and lower rates are a big part of the solution. But even as the Fed lowered short term rates all the way down to 1%, the mortgage market wouldn’t bite and the spread between mortgages and short term rates hit an all time high. The good news is that this changed yesterday.

The Fed announced yesterday that they will buy up $600 billion worth of mortgage backed securities from Fannie and Freddie. This announcement triggered a huge rally in the mortgage backed securities market, and mortgage rates dropped yesterday to their lowest point in the last year. We’ve seen similar moves two other times this year, and both times the low rates were only around for a short time before disappearing. Yesterday the best rates were earlier in the morning, then the market pulled back and lenders re-priced for the worse. Still rates are much better than they have been in some time. I expect we will see a lot of volatility, but there is reason to believe that rates will stay lower this time. Maybe.

This is great news if are in the market for a new home, or if you could lower your bills by refinancing your mortgage, you.  Lower rates mean lower payments, and extra money in your wallet now is a very good thing. If you would like to check on the current rates for your personal situation, let me know.

Illinois Home Mortgage Rates and News             First time home buyer loans

     Do you Twitter? For daily mortgage updates, follow me at @PTmortgage

When mortgage chicago il rates started moving up at the beginning of this summer, many people thought they missed the boat on any chances of refinancing their mortgage and getting a better interest rate and payment. Well, the boat is on the way back to port and it looks like you are about to get another chance. With the weekend takeover of Fannie Mae and Freddie Mac, the government is now standing fully behind these mortgage giants. This move was a green light for investors to buy more mortgage bonds, as the risk on mortgage bonds is now roughly the equivalent of buying Treasury securities. The mortgage bond market had a huge day yesterday, and mortgage interest rates have dropped.

Why would you consider refinancing ?

• You can lower your interest rate and payments.
• You can shorten your loan term and pay your mortgage off early.
• You can take cash out for home improvements, college expenses, investments, or whatever your needs may be.
• You can restructure your debts with a refinance to get rid of your high interest credit card balances and save hundreds of dollars per month.
• If you bought with a low down payment, you can often refinance to get rid of mortgage insurance or your higher rate second mortgage.

· You can get rid of an adjustable mortgage and lock in to a fixed rate.

No one knows if this is a one time improvement for mortgage rates, or if the rally will continue and rates will keep on dropping. But we do know that mortgage rates are back in the 5s, and refinancing makes sense again. Contact me for a personal quote on an Chicago mortgage refinance.

Illinois Mortgage Rates and News

Mortgage loans in Cook County just got a little more complicated. The new anti-predatory lending bill, SB1167, goes into affect today, July 1st. One of the provisions of the bill was to set up a database to keep track of all loans originated in Cook County. Borrowers who fall into certain risk categories will need to get counseling before they can close on their mortgage.

According to SB1167, all loans recorded in Cook County after 7/1/2008 are going to require either a Certificate of Exemption, or a Certificate of Compliance attached to the mortgage. The certificates will be printed from the Anti Predatory Lending Database web site set up by Cook County. Mortgage brokers and mortgage bankers who handle mortgages in Chicago and throughout Cook County are now required to enter the loan in the data base at the start of the transaction. This only applies to owner-occupied 1-4 unit residential properties.

Not every borrower needs the counseling though. The conditions that will trigger the counseling requirement are:

• Any purchase transaction where all borrowers are first time home buyers OR Any primary residence refinance where the loan has one of the features below.

1. The loan has an interest only feature
2. The loan has a prepayment penalty
3. The loan has a negative amortization feature
4. Total points and fees exceed 5%.
5. The loan is an ARM with an interest rate adjustment within the first 3 years. (We’ve been informed by the IAMP that 3/1 ARMs WILL require counseling, even though you may think that the rate adjustments are not “within the first 3 years, but occur after 3 years.)

The following loans are exempt from the counseling requirement: Reverse mortgages, Non-owner occupied (investment), Commercial and multi-family over 4 units.

Predatory lending has been the cause of a lot of foreclosures and a lot of ruined lives. Anything that can put a stop to it is worth doing. But like so many laws this solution isn’t going to have the impact that it is hoping for. For one thing, the real estate market has slowed down and mortgage guidelines have tightened. It’s not as easy to commit fraud when people are paying attention so a lot of the quick-buck sharks and sleazy operators have moved on. The other factor is that the market is ahead of the curve on a lot of these provisions. The loan features that trigger counseling are all features of sub-prime loans, mortgages for borrowers who couldn’t fit into the normal conventional guidelines. Sub-prime loans were the first casualty in the mortgage melt down last year, and no one is making those loans anymore. There will be some sophisticated borrowers who may be forced into counseling because they chose to refinance with an interest only mortgage for the cash-flow benefits, but if first time home buyers are taking on loans with these features they need to know exactly what they are getting into. The law will mean some loans will take a little longer, and it will add an extra step to the process. But who knows, maybe it will even help some people.

Illinois Mortgage Rates and News

I read a lot about the economy and what the experts say about it, but I get the best feel for what is happening from talking with my clients. People need mortgage money whether the economy is up, or down, but they need it for different reasons. When the economy was flying high, a typical phone call would be about buying a new, bigger home, starting an addition to their current home or buying a vacation home. I’m still doing a fair amount of new purchases, but a lot of my calls now are about cash out refinances to consolidate debt. It always makes sense to make sure your mortgage is in line with your overall finances, but it is especially important when money is tight. A debt consolidation loan can help you to restructure your debt in a way that puts more money in your pocket and gives you a plan to actually pay down your debts.

Most people look at their home mortgage and other debt separately. For many people their home is their security and paying it off quickly is their biggest financial goal. It’s not unusual to find someone who has a 15 year mortgage because they are trying to pay down their home quickly, but also has a big balance on their credit cards. The problem here is that the mortgage rate is almost always lower, and tax deductible besides. If you are carrying a balance on your credit cards you are paying interest on the interest, and if you pay the minimum payment there is almost no way to get rid of the debt. What is your over-all debt level? Are you feeling pressure making all the payment on your credit cards and other consumer debt? This is where the debt consolidation mortgage comes in.

A debt consolidation mortgage is a type of cash-out refinance where you use the equity in your home to pay off high interest debts. If you have owned your home for a few years, chances are you’ve built up some equity. Here in the Chicago area, even in this soft real estate market, appreciation has driven home prices much higher over the last years. If you are like most people, the equity in your home may be your biggest asset or source of wealth. A debt consolidation refinance doesn’t change the amount of money you owe, what it does is restructure the type of debt. By converting credit card and consumer debt into your mortgage you can lower your monthly payments, increase your tax benefits and use the savings to pay down your debt or start a savings plan. With conventional mortgages you can remortgage up to 90% of your home’s value for a cash-out loan, but the best rates are available at 70% of the appraised value ( We do have one lender who will loan 100% of your value). With an FHA loan you can take out up to 95% of your home’s appraised value at the best rates.

Here is an example of how this works. Say you have a home that is now worth $350,000. You still owe $200,000 on your first mortgage and have a home equity loan for another $75,000 and you have credit card and consumer debt of $50,000. The monthly payments (not counting taxes and insurance) might look like this.

Principal and interest on your first mortgage $1,319

Interest on your home equity loan 375

Minimum payments on credit cards 1,200

Total payment $2,894 per month

If you refinanced this into a new FHA loan at 95% of the home’s value, you could borrow up to $332,500. This is enough to pay off all the debt, plus the closing costs and the amounts to set up the new escrow accounts. If the new rate is at 6.0% on a 30 year fixed rate – the same rate as I used in the example – here is how it turns out.

Principal and interest $2,023

Monthly mortgage insurance 140

Total payment $2,164

This means that the debt consolidation chicago mortgage refinance saves you $730 each month.

This plan has a lot of advantages, but you are increasing and extending your mortgage which can be a scary thing. Also, you need to have a plan on what you will do with the new savings. There can be a danger in this strategy. First, you are extending your mortgage and paying the loan over a longer period of time. You also need to watch how much the refinance costs. If you are paying too much for the refinance, it will be a long time before you see any benefits. But the biggest problem is that it is too easy to get back in the same trouble if you don’t change your credit habits. I’ve seen too many people who used a cash-out refinance to consolidate their debts and get a new start, only to run up their credit cards and get right back in debt. For a long term solution you need to be able to change your outlook and credit habits, too. On the other hand, if you take some of the money you saved and use it to start a monthly savings or retirement fund, or maybe shorten your mortgage so you are debt free years faster. What is best for you depends on your financial situation and your long and short term goals. Refinancing, if done properly, can be a tool to eliminate your debt and build wealth over time. Any time you take out a loan against the equity in your home you are trading some security for the cash you need, but if you have high balances on your credit cards it can be the right way to go.

Illinois Mortgage Rates and News

Do you have an adjustable rate mortgage that is due to adjust this year? If so, you’ve got plenty of company. There are a lot of Adjustable Rate Mortgages (ARMs) resetting this year. I’ve seen estimates as high as one trillion dollars worth – that’s one with twelve zeros behind it! That is serious money, and I’ve read a lot of commentary about how damaging this could be to our economy this year. But if you have an ARM, should you be worried that your interest rates are going to go pop up and make your payment unaffordable? Probably not. Rush out to illinois mortgage refinancing ? Not necessarily. In a lot of ways ARMs have gotten a bad rap. To see how an ARM reset would affect you, you need to understand how an ARM works.

The most popular versions are what is called hybrid ARMs, these are a combination of a fixed rate and an adjustable. That means they are fixed for a certain time span, 3, 5 or 7 years are the most popular, and converted into a one year ARM after the fixed period ends. So how does your ARM reset? Your ARM changes are based on two things that are set up at the beginning: the index, and the margin. The first part, the index, refers to the financial indicator the rate is based on. Different indexes are used, but they all move up and down based on the strength of the economy. The second part of an ARM loan is the margin. This is set at the closing, and it always stays the same.

So the first step to see what your new rate will be is to add the margin to the index. With the recent Fed rate cuts, all the short term indexes are down sharply. The current 1 year treasury index, a common index in ARM loans, is now around 2.11%. Adding in the margin, typically 2.75%, you get a fully indexed rate of 4.86%. Not a bad rate at all – quite a bit lower than what you could get by refinancing.

But this doesn’t necessarily give you your final rate. There’s one more step. Most ARMS have caps built in to them. Your rate typically can’t increase more than 2% per year, and no more than 6% over the lifetime of the loan. (That’s not the case with all ARMs, so take a look at your mortgage note to make sure.) So if you bought your home back in 2003 with a 5 year ARM, and maybe you bought when rates were near the bottom with the starting rate at 3.75%, if your cap is 2% at the first adjustment, your new rate can’t be higher than 5.75%, even if the fully adjusted rate is higher.

The other thing to keep in mind is how long you plan on staying in your home. If this is your forever home and you want to stay there for the long term, it might make sense to refinance and lock in to the current low rates, even if they are higher than what your adjusted rate would be. If you are going to be there for at least a few more years, refinancing might still make sense, especially if you refinance with low or no closing costs. But if you don’t plan on staying in your home for more than a year or two, you’re better off doing nothing. The current rates are better than your other options, and the worst case scenario isn’t all that bad.

If you have an ARM with a sub prime mortgage your situation will be worse. The margin on Sub Prime loans can be 6%, which means your payment could shoot higher causing real problems. If you have an Option ARM and you’ve been paying just the minimum payment, you owe more now than when you started, and you are on track for some real trouble. In these cases refinancing makes a lot of sense, but with the changes in mortgage guidelines you may find it hard to qualify. But we will talk about that in another post.

illinois mortgage refinance – Please go through it for more information.

Find here more information

First Time Home Buyers Loan : Tax Benefits Make Real Estate a Smart Investment for Chicago Area First Time Home Buyers

Illinois Mortgage Rates