Illinois Mortgage Rates and News

This weekend is Super Bowl Sunday. This is always an exciting time of the year for me, and I’m not just talking about the big game. I expect New England will dominate, and hopefully the Giants will make a game out of it, and we won’t stay tuned just for the commercials. I enjoy the beer and the food and the chance to visit with friends. But that’s not why I’m excited either. Here in Chicago, Super Bowl Sunday traditionally represents the start of the Spring home buying season. As a mortgage banker who loves working with first time home buyers, that’s a great reason to get excited.

Are you a first time home buyer in the market for a new home? With the Chicago area home market slow, and interest rates low, this could be the best time in years to buy your first home. It is a buyer’s market, and you can find bargains if you are ready to go.

One of the biggest hurdles keeping people from buying their first home is coming up with the money for the down payment and closing costs. The good news is there are a lot of ways to buy a home, even if you don’t have much cash. If you’ve been saving and you have ready cash, that’s great. But if you don’t, there are still ways to raise what you need to buy. Here are a few random ideas:

1. Lotto tickets. Well, maybe not. If you’re truly lucky you might be able to buy a home and skip the mortgage. But odds are against it. Big time.
2. Tax refund. This is what usually gets the Spring market going. You’ve received your W2s by now, and refund checks will be in the mail shortly. Your refund might be just enough to get you into a home. 
3. Stocks, savings bonds. Do you have any savings bonds that are tucked away? Many people have stocks and bonds from gifts years ago. A good use for them might be to buy your first home,
4. Gift from a relative. Many programs allow the down payment to come from a gift from a relative. If you have a generous relative who is willing to help, this could be just what you need.
5. Cash out your 401k. If you have money in your company retirement plan, you can liquidate it and use it for your down payment. Because you didn’t pay taxes on it up front, you will have to pay taxes on the amount you liquidate as well as a penalty for withdrawing it early. This can still be a good option in some cases, but a better option might be -
6. Take out a loan against your 401k. The advantage here is that you are paying your self back and you still have your retirement account. Most plans will let you borrow up to half the value in your account, and the interest rate and terms are set so the payment (to yourself) will be affordable.
7. Sell something – If you’re like most people, you probably have more stuff than you know what to do with. Some of this stuff may have value, if you are willing to part with it. Do you have a boat or a motorcycle? How about baseball cards or other collectable’s? EBay makes it easy to convert stuff, to cash, and this could be just what it takes to get you into a home.
8. Down payment assistance programs.  Nehemiah and AmeriDream are two versions of these programs. These are non-profit groups that, in a sense, launder a credit you negotiate from the seller in a way that you can use it for your down payment. These are usually used in conjunction with an FHA loan. I’ll post more on these later. If you have questions on how they work, give me a call.
9. Government grant programs. There are programs like the Chicago Bond Program and the Illinois Bond Program, which provide you with a grant at closing for the money you need for the down payment and closing costs. You need to meet the guidelines, but if you qualify it is often the best way to buy.
10. Look at the long range. Maybe you don’t have the cash to buy what you are looking for, but this might be the time to put yourself on a savings program so you will have it down the road. What can you do now to get extra cash?  Can you take on a second job? How about cutting your expenses? You might be surprised at how much you can save if you have a goal and a plan.

There are lots of ways to buy without having a lot of cash. Use your imagination and you can come up with some more ways to come up with the down payment.

Illinois Mortgage Rates and News

It’s time again for the Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates. Over the last month or two we’ve been in a see-sawing, back and forth, up and down market with mortgage interest rates trying to find direction. Mortgage rates go up or down based on movement in the mortgage backed securities market. Mortgage bonds improve when there are signs of economic weakness, and they get worse when there are signs that the economy is growing and there is a threat of inflation. Over the last few months we’ve changed directions every few days as the market reacted to the latest economic news, up for a few days, down for a few days, the trend going back and forth. Now, with the start of the New Year, I think a major trend has been established, and we are more likely to see lower mortgage rates in the future.

This morning the jobs report came out and employment increased by 18,000, much lower than the 70,000 jobs that were projected, and the unemployment rate increased from 4.7% up to 5.0%. Even the 70,000 projected figure is low. It takes about 150,000 new jobs per month just to absorb new entrants to the job market. The employment number is usually the most watched economic indicator of the month, and the softness in the job market is another sign that we may be heading for a recession. This makes the odds that the Fed will cut their rates again at their next meeting a near certainty. The question is whether they will cut another .25% or a full half point.

Other news from this week has been along the same lines. Manufacturing was down more than expected and home sales were down, as expected. There is still some news that shows inflation is still a threat. Oil prices hit the $100 per barrel price this week, which means higher prices at the pumps. But if wages aren’t going up, this is more likely to mean that consumers have less to spend and not that prices are going out of control. The net result of all this is that Mortgage bonds are up slightly on the news today, and Illinois mortgage rates are slowly dropping.

With all the information pointing to an economic slowdown, does this mean it is a bad time to buy a home? I don’t think so. Whether buying a home makes sense or not depends on your personal situation. If you are in the market for a home the inventory of homes available is high, and it is a buyer’s market. So you are more likely to get a deal that works for you. The economy here in Northern Illinois and around the Chicago area is diverse, and stronger than much of the country. Real estate is local, and the Chicago area never experienced the extreme highs that some other areas saw, and we’re not seeing the drop in prices those areas are seeing now. If you are buying for the long run real estate has always been a great investment.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock with 0 points, and no origination fee.  (Again, there are dozens of 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, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.):

Conventional loans up to $417,000

30 year fixed rate    5.75%      6.838% APR

15 year fixed rate    5.125%    5.237% APR

5-1 A.R.M.               5.375%     5.649% APR        

7-1 A.R.M.               5.50%       5.847% APR

For Jumbo loans over $417,000

30 year fixed rate    6.25%       6.375% APR

7-1 A.R.M.               6.125%     6.229% APR

FHA LOANS up to $270,200 with 1 point origination fee

30 year fixed rate    5.50%    5.823% APR

These are just a sampling of the rates available. We have special programs for first time home buyer and all the bond programs including the City of Chicago Bond program and the State of Illinois Bond program with no down payment below market pricing. There is not a lot of economic news coming out next week, so it should be a quieter week next week.

Illinois Mortgage Rates and News.

2007 is almost over. Good riddance. It’s been a turbulent, crazy, chaotic year in the real estate and mortgage industry. This was the year when it all hit the fan.

• The real estate market slowed down and home prices stagnated or fell.
• The sub prime mortgage sector imploded and hundreds of wholesale lenders went out of business.
• The sub prime virus became a credit crunch, infecting the biggest conforming mortgage lenders. One top 10 mortgage lender bit the dust, and some of the biggest names hung on by the skin of their teeth.
• The costs of getting a mortgage went up, especially for those with good, but not great credit .
• The cost of a Jumbo loan moved up sharply and still hasn’t recovered .
• We saw a return to more traditional underwriting. Income verification is now the norm. Good credit  and down payments are now expected, too.
• Foreclosures and loan defaults spiked, especially in the areas which saw the highest home price increases.

I’ve been an Illinois mortgage lender for 16 years now, and I’ve never seen a year like this. Historically the closest comparison was back in the 80s when the Savings and Loans crisis shook up the mortgage industry, led to a regional recession, a spike in foreclosures and opened the door for mortgage brokers to expand their business. We still don’t know what the long term affects of this melt down will be, but we know the fallout will continue through the new year.

Our economy is a lot like a big Rube Goldberg Machine. One action impacts on another and sets off a chain reaction which leads in a very complicated, round-about way to the end result. You take away one element and the machine won’t work. Consumer spending has long been the driving engine of our economy. What will happen if the housing crunch causes consumers to slow spending down by a lot? How will the rest of our economy react?

There are a lot of unknowns as we go into the new year, and the future is far from clear. I expect that this will be a slower year as the housing problems continue to unwind. But I do see some bright spots and reasons for optimism, too. Putting on my fortune teller hat, here are a few things that I expect to happen over the course of 2008.

1. People will continue to buy homes. Here in Illinois, especially in the Chicago area, the economy is diverse and there is pent up demand for homes. This year, even with all the problems, was the fifth highest year on record for home sales. The market will continue to be soft, but many home buyers will get off the fence and take advantage of bargains.
2. Interest rates will drop. The Fed is in a tough situation. They are walking a wire with inflation on one side and a recession on the other. As the overall economy softens the greater risk will be on the recession side. I expect that we will see lower mortgage interest rates over the course of this year.
3. Conventional mortgage guidelines will continue to tighten. All the major parties in the real estate market are under pressure from mistakes they made during the boom years. Fannie Mae and Freddie Mac have already tightened considerably over the last months, but they will go further, shutting credit off to many borrowers who used to be looked at as great risks. They were looking at opportunity then, they are looking at risk now. Chances are they will go to far in their tightening, making conventional mortgages tougher to qualify for.
4. FHA and Government Bond programs will take up some of the slack. The Senate passed the FHA modernization bill this month which will lower the down payment required from 3% to 0 down in some cases, and raise the loan limits up to the conventional limit ($417,000). This bill passed the House earlier, and it is expected that a reconciled bill will become law sometime after the first of the year. First time home buyer bond programs like the City of Chicago Bond Program and the State of Illinois Mortgage Bond Program will also fill a niche and help keep homes affordable for first time home buyers.
5. Option A.R.M.s will be the next problem area. About 20% of mortgages originated last year were option arms, which start at an artificially low payment rate but the true rate accrues on the back end, increasing the mortgage balance. Many borrowers took on these loans with out understanding how they work. With their minimum payments low they haven’t caused the payment shock that has been such a problem with sub prime loans, but in areas where home values are deteriorating this will become a real problem.
6. The Government will legislate cures that won’t help and may make things worse. We’ve already seen this in Illinois and there are proposed bills in congress. Predatory lending is a problem, but many of the proposed bills would make it harder for people to qualify, making the problem worse.
7. Real estate will continue to be a local phenomenon. Some markets will continue to decline, others will muddle through without much pain. The recent Case Schiller housing report showed many areas with double digit declines in home prices, but other areas where prices were flat. Chicago, and much of the Midwest, didn’t have the wild upward swings in pricing that some areas saw, and it is likely that it won’t see the sharp declines.

This year has been a time of big changes and we it’s guaranteed we will see more changes as we go forward. In hindsight the problems in the real estate market were glaring and we should have seen them coming. I know myself that a lot of the loans we were doing didn’t make sense in a traditional sense, but I never expected the year to turn out like it did. We will see what the coming year brings. Any opinions on what to expect?

Illinois Mortgage Rates and News

The web is currently home to about 110 million blogs. About 120,000 new weblogs are created every day, and each day there are about 1,500,000 new blog posts. That is  a lot of information flowing out in cyber-space. With so many blogs, and so much competition, how can anyone stand out?

Starting a new blog has to be a sign of vanity. What can I possibly say that hasn’t been said before, and better? Even in my niche, mortgages and real estate, there are thousands of blogs and many excellent bloggers who write with authority and insight. What can I bring to the party that will add value and further the conversation?

It may be vanity, but with someone as good looking and smart as me, vanity comes with the territory. That’s a joke. Mostly. Just as every one of the 6 billion humans on our planet are unique in some way, each blogger brings their own life experience and perspective.

I’ve been in the mortgage business since 1992, so I’ve seen a lot of changes and formed a lot of opinions. I’ve also had the opportunity to help a whole lot of people buy their homes and improve their finances.

I focus on education and communication, letting potential borrowers know exactly what their options are, how the mortgage process works and helping them find the best solution for their needs. It seem to me that a blog is just a bigger platform (I hope) for education and communication. 

I live in the Chicago area, so I concentrate on helping people with their mortgages in Chicago, the Chicago suburbs and throughout Illinois. As time goes on I plan to talk about the issues that are important to people in my area, but I hope to add value to anyone who is interested in mortgages or real estate.

So whether you are a first time home buyer searching for information on first time home buyer programs, or someone who wants to know the best way to shop for a loan, I hope you come back and join the conversation. Illinois Mortgage Rates and News is on the air!