Illinois Mortgage Rates and News

In this installment of the Chicago Video Home Buyers Guide, we talk about income qualifying, and how your income is looked at when you apply for a mortgage. This is one of the major factors of qualifying for a loan, and for how much of a mortgage you can afford. Part of this

comes down to income stability, or how likely is your income to continue and how reliably can we predict what you will earn in the future. The other part of this is affordability, or how you can fit the new mortgage into your budget. For this we look at ratios, or comparisons of how much of your gross income will be taken up by the mortgage, and how much of your income it will take to pay off the mortgage and all your other debts.

If I can help in any way, please let me know.

Other videos in this series -

Credit Qualifying and What You Can Do to Improve Your Credit Scores

Pre-Qualification and Mortgage Pre-Approval

Equity build up – How you build value by paying down your mortgage

How leverage and home appreciation will build value over time

The tax benefits of owning your own home

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

Free- Home Buyer’s Guide

Free Mortgage Pre-approval

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

In this installment of the Chicago Video Home Buyers Guide, we go over the tax advantages of owning your own home. The government encourages owning your own home and real estate is treated differently from every other

purchase. When you buy a home, you get to write off the amount you pay for mortgage interest as well as the amount you pay for real estate taxes. This means that the government is, in a sense helping you pay for your home, and you can afford a higher mortgage payment than the equivalent rental payment. Combined with other financial advantages of buying a home, this is a strong incentive to buy, and makes real estate more affordable.

The Chicago Video Home Buyers Guide will be released one segment at a time over the next few months. If this segment is helpful, please pass it on to friends or others who are thinking of buying their own home. Let me know your thoughts. Thanks for watching.

Other videos in this series -

Equity build up – How you build value by paying down your mortgage

How leverage and home appreciation will build value over time

Free- Home Buyer’s Guide

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

Peter Thompson 630-479-6424

Illinois Mortgage Rates                   First time home buyer loans

Chicago Mortgage Company            Chicago FHA Mortgages

The purchase market has been picking up steam over the last few months.Most of the activity is with new buyers coming in to buy their first home (they have a great advantage, not having a home to sell) and a good portion of what they are buying is the distressed properties, short sales and foreclosures, which are weighing down the market. Recently Fed Chairman Bernanke said that he saw signs that the real estate market is bottoming out and stabilizing. We won’t know if that is the case until after the fact, but there is no doubt that the market is buzzing now. Here are some of the reasons you should (especially if you are a first time home buyer) buy a home now:

$8,000 first time home buyer tax credit – This is one of the biggest reasons for home buyers to buy now rather than waiting. If you are a first time home buyer (or haven’t owned a home in the last 3 years) the government will pay you up to $8,000 for buying a home now. The credit will be for 10% of the purchase price up to $8,000 and you can get the credit this year by amending your tax return after the closing. There are some income caps, so this won’t work for everyone, but if you qualify, the first time home buyer tax credit is a great incentive to buy.

Selection – There are homes in the market in all areas and all price ranges. With more houses on the market you can pick and choose and find the home you want. It wasn’t so long ago that buyers were jumping on new listings as they came onto the market, even if the home wasn’t exactly what they were looking for. You can pick and choose, now.

It’s a buyer’s market – Again, the best time to buy is when most people want to sell. If you buy now you can get a lot more house for your money, and you have a lot more negotiating power.

Interest rates are low – Chicago mortgage rates have bumped up recently, but are still near their all time lows. Low mortgage rates means your mortgage payment takes you a lot farther than it did before. We’re not that far off of the all time lows we hit several years back. It is smart to take advantage of the low mortgage rates while they are still available.

Great financing is available – There’s a lot of talk about how the problems in the mortgage market have made it harder for borrowers to get financing. Some programs have been cut out, and guidelines are tougher than they were before. But there is still a lot of mortgage money available, including options for low down payment, and FHA is a great way for first time home buyers to buy that first home.

Tax savings – Buying a home is one of the best ways to save money on taxes. Your mortgage interest, real estate taxes and in many cases mortgage insurance are all tax deductible. If you are a first time home buyer this means that after-tax, you can pay a lot more for a mortgage payment than you pay for rent.

Appreciation – This might not seem like the best reason to buy, with prices stagnating and falling in some areas, but in the long run, home prices always move up. There is a lot of pessimism in the real estate market today, but even the most pessimistic are bullish in the long run.

Equity build up – As you pay down your mortgage you build up equity in your home. Most people don’t even think of this because it is so gradual, but every mortgage payment (as long as it is an amortizing loan) pays a little less interest and a little more principal. In a way owning a home is a form of forced savings.

Rents are rising – Buying a home means you can fix your mortgage payment, at least the principal and interest portion. Rents are projected to rise this year and over time.

Those are the hard financial reasons for buying a home now, but there are other good reasons to buy now:

You need more room – Has your family has grown, and you are bursting at the seams? You need a new place to put all your stuff? If you have needs that you’ve been putting off, this could be the right time to buy and take advantage of the buyers market.

Control – If you own your home, you can do what you want to with it. Have a dog? Not a problem. Want to plant a garden? Go for it. Want to paint stripes on the walls? Paint your heart out, it’s your home and you are in control.

Pride of ownership – There is a big difference between renting a place and having a home of your own.

It’s the American Dream – Not only that, but buying a new home gives you a reason to throw a house warming party.

These are some reasons for buying now, but buying isn’t the right course for everyone. Buying a home is a long-term investment. If you can’t afford to hold on for the long run, you might be better off renting.

Illinois Mortgage Rates and News

More information for first time home buyers:

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

(In honor of Valentines Day, here is a repost from last year)

It’s all about commitment. If you are a first time home buyer – that is, if you are thinking about becoming a first time home buyer but you are renting now – this is a big step. You probably have some serious commitment issues.

Renting is a casual fling. You probably like the place you live in now. Maybe it has a pool and a rec-center that you’ve been meaning to use, but never find the time. Maybe it’s in a great location, close to work and in an area with a good night life. For one reason or another, the place has its charms. It was just what you needed when you first moved in. But now… now, it seems constraining. Maybe even childish. You’ve outgrown it.

Not only have you outgrown it, but you have friends who have taken the big step and bought a place of their own. This seems like the grown up thing to do, and you like the idea of having a real place of your own, too. Maybe you envy the little touches they’ve made to personalize their home. You would like to make your home more of a reflection of your personality and taste, but it’s a rental. You can only do so much.

And then there is the money aspect. In the long run, owning your own home is a way to build long term wealth. You know there are tax savings, and maybe you know someone who struggled to come up with the down payment for their first home, and a few years later they had enough equity saved for a big down payment on a new, nicer house. That doesn’t happen when you rent.

But still, there is the commitment issue. Buying a home seems so… permanent. Maybe not permanent for that house, but once you buy a home, you know your days of renting are over. And besides, the market is awful, and it doesn’t make sense to buy when all you hear is bad news. Maybe renting isn’t where you want to be for the rest of your life, but at least you know what to expect.

This could be a great time to buy. Prices are the lowest they’ve been in years, interest rates are low and there are ways to buy a home, even if you don’t have a lot of money. You know there is a great house for you somewhere, the love of your life, maybe. You will know it is right as soon as you see it – love at first sight?  But commitment is a scary thing and you don’t want to make a mistake. So for now, you continue to write rent checks to your landlord.

Still, late at night when all is quiet, do you find yourself looking at home sites on the Internet, or paging through old home listing magazines, wondering what might be?

Happy Valentine’s Day

Illinois Mortgage Rates                   First time home buyer loans               

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If you are a first time home buyer thinking of buying a home here in the Chicago area, you are probably asking yourself, why would anyone want to buy a home in today’s market? Fear is in the air and it is a scary time to buy. The news is filled with talk of foreclosures and declining markets. Although the Chicago area has remained stable, real estate prices have fallen sharply in many areas of the country. If you buy a home now, how do you know that prices won’t fall lower? The truth is, you don’t. But if you have good reasons to buy (You need more space, growing family, moving up in your job … whatever, you know your reasons), and you are planning for the long term, now could be a great time to buy a home here in the Chicago area.

Mortgage rates are low now and you have your choice of homes to buy. But there are some crucial benefits of buying real estate that go beyond the current market conditions. In an earlier post I talked about the first financial benefit of owning a home, how you gradually build equity by paying down your loan. A more dramatic benefit of owning a home is property appreciation. Over the years, home prices have risen steadily in the Chicago area and throughout the country. Even now, with the market slower, it still costs tens of thousands of dollars more to buy a home in the Chicago area than it did just a few years ago. Home prices could fall lower, but if you look at long term trends, real estate usually goes up and chances are that homes in the Chicago area will cost a lot more 5 years from now than they do now.

So how does appreciation work for you? Here’s an example. If you buy a home for $300,000, and the market appreciates, that is the property values increase, by 3% per year (Appreciation doesn’t move in a straight line. It may be 0 one year and 5% the next.), at the end of 5 years your home will be worth over $347,000. At the end of 10 years it would be worth over $400,000.

In this example, you have increased your equity by nearly $100,000 while living in your own home. There’s no guarantee of what home values will be in the future, but this is what has happened throughout the Chicago area in the past.

Let’s take this a step further. Let’s say you bought this same home for $300,000, but that you took out a mortgage for 95% of the purchase price, or $285,000. Let’s say that the mortgage was a 30 year fixed rate with an interest rate of 6.0%. Because your mortgage principal balance goes down over time, at the end of the tenth year your mortgage balance will be paid down to $238,500. If, through appreciation, the value has grown to $400,000, your equity is now worth over $165,000. Not bad for an investment of only $15,000.

Appreciation is the reason so many people are able to move up to a larger house. Having the extra money to use as a down payment, gives you the buying power to buy a larger home for your growing family, or maybe the chance to move into your dream home. Appreciation is one of the key benefits of homeownership, but the key here is that you need to allow time for it to work.

The market has slowed down recently and those who bought a home in the last year or two, haven’t seen much of any appreciation, and in some areas the prices have fallen. Time is the factor here. Real estate isn’t an investment you jump in and jump out of. It takes time to see all the benefits and when you buy a home you should plan on keeping the home for several years, minimum.

With prices down, this could be an opportunity. Historically, the real estate market has always moved higher. It may take some time before prices start rising again, but there are always new buyers coming into the market, through birth and immigration. The demographic push means that real estate prices will rise over time.

But owning your own home is a great investment even if prices stay flat. Tax advantages from owning your own home means the government is helping you to pay for your mortgage. I’ll go over this in a future post.

Illinois Mortgage Rates and News

Find here more information

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

As we head into the Spring home buying market, first time home buyers in the Chicago area and throughout Illinois will be making their first tentative steps toward buying a home of their own. It’s conventional wisdom that buying a home makes sense, even now with all the bad news on the housing front. But the question is, does owning a home make sense for you? Some of the reasons you might want to buy are more intangible but emotionally compelling – the pride of having a place of your own, a chance to establish your roots, the joy of having a real home where you can express your own personality and style. These are real reasons for buying your first home. But the some of the best reasons to buy may be financial. In fact, buying a home may be the smartest financial decision you will make in your lifetime.

You know some of the reasons to buy, rates are low and it is a buyer’s market. But the reasons to buy a home go beyond that. If you are a first time home buyer, thinking about buying your first home, you need to know what the advantages of buying are, and how buying a home compares to renting. There are three prime financial benefits of home ownership:

Principal reduction

Appreciation

Tax Advantages

Let’s look at principal reduction. First of all, a quick explanation – with most mortgages each payment is divided into two portions, principal and interest. Interest is the lender’s profit, the amount they charge for the use of their money over the time you hold the mortgage. Principal is the amount of the mortgage you are paying back each month.

Interest is charged on the outstanding loan balance each month. This means that in the beginning years, you are paying mostly interest. But with each payment you make you pay off a little more of the principal, and the loan balance goes down a little more each month. This doesn’t seem like much at first, but it adds up over time.

Let’s say you borrow $200,000 with a fixed rate mortgage at 5.75% interest over 30 years. That means your mortgage payment each month is $1,167. On your first payment, about $958 will go to pay the interest, and just over $208 will go toward the principal, or paying back the loan. That means after one payment, your loan has been reduced by $208 to $199,791. The next month’s payment is based on 5.75% of the new balance, so your interest portion goes down, and the principal payback goes up a little more.

Each month a little more of your payment goes toward reducing your principal, and you pay little less toward interest. If you stay in this house, and this mortgage, for the whole 30 years, you will off the entire mortgage and you will own the home free and clear.

In the early years, you are paying off mostly interest, and chances are you won’t be in that same home 30 years from now (Even if you are, odds are you won’t be in the same loan. Refinancing your mortgage is a way to tap into the equity you’ve built up). Principal reduction is a benefit, but there are other, bigger, advantages to home ownership.

I’ll cover these benefits of owning in my next posts.