Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending May 23rd, my take on the week’s financial news and how it affected Illinois mortgage rates.

The economy has been on a tightrope for quite some time, perched above the brink, on one side inflation the other economic stagnation. The Fed has been walking out on this tight rope, careful to not lean too far one way or the other. It’s been a difficult task and so far it looks like they are dipping on both sides, but still maintaining balance. The economy is slowing and inflation is heating up, but there are signs we are heading in the right direction.

Right now the markets see inflation as the bigger threat. The Fed has signaled that they are through with rate cuts, at least for the foreseeable future, and that they are prepared to do whatever is necessary to stop inflation. But the inflation we are seeing now is mostly a result of higher commodity prices, especially oil. Oil prices were up again this week, hitting as high as $135 per barrel. You’ve seen the results at the gas pump and the super market, but this inflation hasn’t carried over to higher wages. When economies get into inflationary spirals workers pay moves up too. In this economy the cost of anything requiring oil or transportation is going up, but paychecks are kept in line because of the slow economy and global competition. This squeezes the consumer more, but in the long run it will mean less demand, which will bring down the inflation rate on its own. We are seeing this now in how the high gas prices have taken out the psychological value of the stimulus checks that have gone out, and several Fed governors have suggested that they see inflation peaking and then heading down.

Again, the economic indicators this week were mixed. Inflation was tamer than expected, but the core rate was higher. Jobless claims came in slightly better than expected, but the 4 week average was again in the danger zone. Home sales were higher than last month, but down sharply from the reading last year at this time. According to the National Association of Realtors, In Illinois home prices were up by 8.5% in April over March, but down 27% from the year earlier reading.

As I’ve said before, markets move based on fear and greed. Mortgage rates are determined by what happens in the mortgage bond markets and how the fear and greed balance out. On a day to day basis mortgage rates have been extremely volatile, and it has become almost commonplace for mortgage bonds to go up or down 40 tics in a day, an amount that used to be exceptional. There have been days when the market has moved as much as 100 tics, with multiple re-prices during the day. But if you pull back and look at the activity from a longer view, we are going back in forth in a fairly narrow range. This week the mortgage backed securities markets had two days where prices went up, a lot, two days where they went down about the same, and one day, Friday, where they moved around a lot, but ended with no change. There was a huge swing between the high for the week and the low, but at the end of the week we were very close to where we started. Over the last two months we have seen this same trend, though in a wider range. The market reacts (overreacts?) based on news reports and whatever happens that day seems to be the most important factor, until the next, possibly contradictory report is released the next day. Chances are that as long as the forces of inflation and the slowdown counteract each other, we will continue to stay in this range. What this means is that you should be aware of these trends if you are buying a home or refinancing your mortgage, and take these trends into account when locking your loan. If you are in the market to refinance your mortgage, get your papers ready. We’ve had a couple of opportunities where the rates dropped to the lowest points, but the windows were only open for a short time. If it happens again you should be ready to jump on it. The same goes if you are in the market to buy a home here in the Chicago area.

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.  The conventional loans 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 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    5.875%   5.942% APR

15 year fixed rate    5.50%     5.657% APR

5-1 A.R.M.               5.25%     5.398% APR      

7-1 A.R.M.               5.50%     5.659% APR

For Jumbo loans over $417,000

30 year fixed rate*   6.50%     6.674% APR – Requires 20% down payment

7-1 A.R.M.*              5.75%     6.014% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS

With 1 point origination fee – 60 day lock

30 year fixed rate   5.75%     6.159% APR

With no origination fee –        60 day lock

30 year fixed rate   6.00%     6.274%

These are just a few of the 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. Have a great Memorial Day and tune in later for more mortgage and real estate commentary.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending May 16th, my take on the week’s financial news and how it affected Illinois mortgage rates.

If you follow the news, it was a grim week with talk of natural disasters in Asia, an earthquake in China and a cyclone in Myanmar. With true disasters like this the mess in the real estate and mortgage markets doesn’t look nearly so bad. In fact, there were a few signs this week that we are starting to come out of the worst of the mess. While it is too soon to say that we have reached a bottom, there are signs that point to how we can navigate through this. We are still a long ways from where we were, but in a way we are coming to a new normal, and I see signs of the financial markets stabilizing and the mortgage industry gaining confidence. Two things happened this week that point to this conclusion. One, foreign investors started to show interest in buying mortgage bonds again, and two, Fannie Mae is getting rid of their disastrous declining market policy.

Let’s start out with number two, Fannie Mae’s scrapping their declining market policy. Last December, in a reaction to the down turn in the housing market, Fannie Mae, the biggest purchaser of mortgages, came up with a plan that they thought would shield them from the risk of falling home prices. The idea was to identify markets where the prices were falling, and require a higher down payment in those areas. So if someone was going to buy with what would normally be a 95% loan to value (5% down), in a declining market they would need to put down 10%. The idea was for Fannie Mae to cut their exposure in the worst markets. In a way this was a form of Redlining, a discriminatory lending practice and because of this they became a target for consumer groups. The bigger problem was that it made things worse. By making financing more difficult it took more buyers out of the system, guaranteeing that home prices would continue to spiral down. And while the original idea was to cap off the worst areas, the declining markets started to creep into areas that were looked at as more stable, including portions of the Chicago area, again making sure that prices would continue to fall. The new plan is to go back to the old plan. Financing rules will be the same for all parts of the country, with no hits based on the market condition of the area. This change will be part of the release of the new DU version 7, which is going to be tightening qualifying overall, so it’s not all good news. The changes go into affect staring June first.

The other encouraging sign was a return of foreign investors to the mortgage bond markets this week. The lack of foreign buyers in the mortgage backed securities market has been one factor in keeping mortgage rates higher than they would be otherwise. There is now evidence that the foreign investors are starting to buy again. This means they have confidence that the worst is over, and are willing to vote with their cash. We are also starting to see some movement on some programs that have been given up for dead, like adjustable rate mortgages and Jumbo loans. We’ll see how this develops as time goes on, but it is another encouraging sign.

A lot of economic reports were released this week, and as has been usual in this market, they were a mixed bag. Retail sales numbers dropped, but when low auto sales were factored out they increased by a higher than expected .5%. This could be looked at as proof that consumers are still spending, which means that the economy still has some strength. It could also be looked at as a reflection of higher prices, and the increase is due to inflation. Housing starts unexpectedly moved higher, but again this was a mixed result because the increase was due to a surge in multi unit apartment buildings. Single family home starts dropped for the 12^th straight month. Consumer price index came in lower than expected, which means inflation is still manageable. Good news for mortgage rates. There were some other reports which showed that the economy is continuing to loose steam, and consumer confidence fell again to its lowest reading since 1980.

All this activity meant another see-saw market where volatility was amazingly high. Mortgage bonds tried to break through a layer of resistance, and finally did on Friday afternoon, before giving back their gains and ending down for the session. Still, mortgage rates are about the same as they were last week, and poised at level of support. Over the last few weeks rates have dropped each time they got to this level, but at some point I think we are going to break through and rates will drop down again. If you are in the market to refinance your mortgage, get your papers ready. We’ve had a couple of opportunities where the rates dropped to the lowest points, but the windows were only open for a short time. If it happens again you should be ready to jump on it.

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.  The conventional loans 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 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    5.875%   5.942% APR

15 year fixed rate    5.50%   5.657% APR

5-1 A.R.M.               5.25%     5.398% APR      

7-1 A.R.M.               5.50%     5.659% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.50%     6.674% APR – Requires 20% down payment

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines – 75% loan to value, tighter ratios.)

7-1 A.R.M.*             5.75%     6.014% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS

With 1 point origination fee – 60 day lock

30 year fixed rate   5.75%     6.159% APR

With no origination fee –        60 day lock

30 year fixed rate   6.00%     6.274%

These are just a few of the 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 a situation, let me know how I can help.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending May 2nd, my take on the week’s financial news and how it affected Illinois mortgage rates.

There is one week every month where all the data hits at the same time, sending an overload of information to the financial markets. This was that week. As I’ve written before, mortgage interest rates go up and down based on activity in the mortgage bond market. Mortgage bond traders are the financial market’s version of tea readers or fortune tellers. Collectively, they take in all the data as it is released, make split second judgments on how the data will affect the value of their investments over the long term and buy or sell the bonds based on their predictions. And they do this throughout the day, each day. A lot of money is riding on each decision, and the pressure to get the call right is enormous. This is especially true in our current market where volatility is so high. So as the information is released, all the traders make their decisions, usually assuming the worst. Later, it’s not uncommon that they look a little deeper and change their minds about the impact of the data. We saw great examples of that this week.

There were two huge events which impacted mortgage rates this week. On Wednesday the Federal Open Market Committee (The Fed) released their latest decision on short term interest rates. Since last September the Fed has been on an absolute rate cutting tear. They cut rates again at this meeting, the seventh time in a row, by a .25% point, bringing the discount rate down to 2.0%. This was expected, and mostly priced into mortgage rates going into the meeting. You might think that if short term rates go lower, mortgage rates should follow. But it doesn’t work like this. Bond traders are looking at the long term, and lower rates can bring on inflation which kills the return on their bonds. As has happened nearly every time the Fed announced the cut, mortgage bond traders sold off their positions and mortgage rates got worse. At first. As the day went on, they took the time to read the statement announcing the cut, and collectively, the mortgage bond market readjusted its opinion. The wording in the statement suggested that the Fed is near the end of their cutting spree, at least for now. Mortgage bonds surged and by the end of the day we were at the best rates we’ve seen in weeks.

The other big event this week was the release of the Jobs report Friday morning. Earlier in the week unemployment insurance claims jumped to 380,000, the highest level in five years, so everyone knew the job market was weak. The expectation was that the report would show a loss of 75,000 jobs. The actual number came in at a loss of 20,000 jobs, much better than expected. The market reacted by dropping right through the floor. Mortgage bonds feel 134 basis points (a HUGE drop). At first. Upon reflection traders looked at the numbers again and decided that this still wasn’t a rosy picture. Our economy needs to add 150,000 jobs each month, just to stay even. A loss of 20,000 jobs means we are 170,000 jobs worse than we need to be just to keep running in place. By the time lenders released rates in the morning, the loss was much lower, and at points in the day mortgage bonds traded in positive territory before ending with a moderate loss for the day. But this doesn’t tell the full story. The jobs report is the most anticipated report released each month, but it is almost never right. The report is based on a historical model, and much of it is compiled by assuming that the numbers will correspond to historical averages. This means that when the economy is growing the job gain is underreported, and when the economy is contracting job loss numbers look better than they really are. We are in a contraction now, and the previous reports have all been revised downward as the real numbers came in. So expect that these numbers will end up worse than reported, too.

So how has all this activity affected mortgage rates? We are now seeing the best rates we’ve seen over the last several weeks. 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.  The conventional loans 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 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%     5.867% APR

15 year fixed rate    5.375%   5.484% APR

5-1 A.R.M.               5.25%     5.398% APR      

7-1 A.R.M.               5.50%     5.659% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.50%     6.674% APR – Requires 20% down payment

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines – 75% loan to value, tighter ratios.)

7-1 A.R.M.*             5.75%    6.014% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS

With 1 point origination fee – 60 day lock

30 year fixed rate  5.625%        6.047% APR

With no origination fee –        60 day lock

30 year fixed rate  5.875%        6.164%

These are just a few of the programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. Next week will be a lighter week for economic reports, but if the past is any guide, I expect we will still see some big swings over the course of the week. If you have any questions or want to go over a situation, let me know how I can help.

Illinois Mortgage Rates and News

The Check is in the mail – The first batch of economic stimulus checks are going out this week. Anyone who files a tax return up through October of this year is eligible, and with payouts of up to $600 per individual and $300 for each child under 17, this should cover several tanks of gas. What are you planning to do with your check? The idea behind the checks is the hope that if everyone goes out and buys something, this will kick the economy back in gear. There are of course, a few problems with this theory. First of all, not everyone is going to buy something. If you are feeling the economic pinch, you might rest easier putting this money in your savings account or paying off your credit cards. And those who do their civic duty and go out shopping are likely to buy foreign goods which will give a more limited kick. But if the checks make people feel more confident about their own finances, then the plan will have done its job. I think it will take more than this to prime the pump.

Take a ride on the Foreclosure Bus – I live in Dupage County, in the Western Suburbs of Chicago. The other day I noticed a number of small plastic signs set strategically along the side of the road. You’ve seen these kinds of signs before, they are often an ugly yellow that demands attention, and they usually appeal to some basic need, like sex or money. More specifically they tout themselves as the answer to what you need. Two examples are: Real Estate Investor Needs Apprentice – $40,000 per month, or Downers Grove (or Lisle, Wheaton, Glen Ellyn, insert your town) Singles Wanted, with a web site or phone number underneath. This was a new sign, one I hadn’t seen before. This one read: Tour Foreclosures by Bus. Now this got my curiosity going. I know that Hollywood has a tour of celebrity homes, and Chicago has architectural tours and ghost tours and all sorts of tourism related activities. But taking a tour of foreclosed properties seems a little bizarre. I know there are investors who are looking for ways to take advantage of the real estate slow down, and foreclosed properties sound like a natural. It’s not always easy to find the bargains, though. I have an investor client who put an offer on a pre-foreclosed property (a short sale – this is where the lender would have to agree to let the buyer buy for less than the full amount of the mortgage so they don’t have to go to the expense of foreclosing the property) 3 months ago. He’s still waiting for an answer. I called the number on the sign and was referred to a web site. The web site offers several tours in an “air conditioned bus” stopping at a variety of pre-foreclosed and bank owned properties. A Realtor is giving the tour and you will be able to make offers on the homes if you choose. The bus isn’t free, though. A ticket for one tour cost about $100, another tour of luxury homes was priced at over $300. But lunch is included. It is a sad fact of life that foreclosures are on the rise, even in the nicest areas. But if you are looking to invest, you don’t have to take a bus. If you are looking for investment property and need the name of a Realtor who can help you, let me know and I’ll direct you to an expert who can offer personalized service.

The Waiting Game – Tomorrow is a big day for those who are watching interest rates. The Federal Open Market Committee (the Fed) is expected to lower short term rates again by an anticipated .25 point. This cut is already built into the pricing, but the real interest is in what the Fed will say when they announce the cut. The last 2 meetings have ended up with major rate cuts, but some dissent from inside, as some Fed members worry that the rapid cuts in rate will go too far and fuel inflation. The conventional wisdom now is that the Fed is nearing the end of their series of cuts (for now, at least). If they say this in their announcement, look for mortgage bonds to surge and mortgage rates to fall. The Chicago PMI and the GDP (both show signs of strength or weakness in the economy) will also be released, so this should be a wild day for interest rates. I’ve been looking for rates to go lower, and I stand by that prediction.

Illinois Mortgage Rates and New

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 18th, my take on the week’s financial news and how it affected Illinois mortgage rates.

In last weeks review I said that the calm in the mortgage backed securities market was unlikely to last, and that I

expected rates to make a move out of their range soon. On that count I was 100% correct. I did however think that the odds were that the move would be toward lower interest rates. I blew it on that call. Mortgage bonds tanked this week sending mortgage interest rates higher – though there was an impressive recovery on Friday afternoon which brought rates back from the brink. Last week the consensus was that the economy was softening and we had a ways to go before the credit crunch played out. This week traders are feeling more optimistic on the economy and think that the worst is over. The view now is that we are finished with Fed rate cuts and our biggest worry is inflation. Not a lot has changed over the week to justify such a big swing in perception. There were some better than expected earnings reports this week, and a few economic reports came in better than projections. But most of the news was in line with earlier reports of a soft economy. In fact, most of the news that came out this week showed that there may still be some bumps in the road ahead of us. Credit is still tight and consumers are feeling pressured. The slowdown appears to be spreading beyond our borders and becoming global. We may be at the tail end of the credit crunch – at least from the perspective of the big financial players – but it is going to take a while before this trickles down to the American consumer.

The most anticipated reports this week were the release of CPI and PPI, two measures of inflation. PPI, the producer price index, came in a little hotter than expected, but this was due to high fuel costs. This isn’t always the best measure of inflation because in a soft economy producers aren’t always able to push their higher costs on to consumers, and often take the hit in their profit margins. CPI, the consumer price index, came in right as expected, with a moderate increase, not in the danger zone. Unemployment claims inched higher to 322,000. The levels of unemployment claims are at the level seen in past recessions. The Philadelphia Fed index came in much worse than expected and at the lowest level since 2001, another sign of a slowdown, and the Fed Beige book showed that economic conditions have “weakened” and residential construction is “anemic”.

All this data would normally cause mortgage bonds to rally pushing mortgage rates lower. So what happened that made traders so optimistic? A couple of things. First, some big corporations – IBM, Google and Caterpillar – came in with higher than expected earnings – mostly due to a rise in sales over seas, partly helped by a weak dollar. And then some financial powerhouses – Citigroup and Merrill Lynch – came in with huge losses, but less than expected. Citigroup announced the write down of another $12 Billion from bad credit loans, a quarterly loss of $5.1 Billion, and plans to layoff 9,000 employees. I figured out a long time ago that traders (stock, bond, whatever) live in Bizarro world, so this doesn’t completely surprise me. The thinking is that these losses, while HUGE, are less than what they could have been, so this means we are now near the bottom and we are ready to get back to the way things used to be. It is true that corporations like Citi can make a ton of money quickly. Their cost of borrowing has gone down, but they haven’t lowered the rates that consumers pay for most loans. The question here is whether or not rising defaults on credit cards and car loans will cut into these profits down the road.

Though rates have risen, I still think we are going to see lower mortgage rates before this is all over. Traders are fickle creatures. They jump on a trend and ride it as far as they can, but they are quick to jump off and ride in the other direction at the slightest change in direction. Little changes make big moves, especially now in a time when volatility is so high. Friday afternoon was a good example of this. Mortgage bonds started the day off with a loss of 66 basis points (a huge loss). It looked like bonds were on track to test the worst levels we’ve seen in months, when they switched direction and rallied higher. At the end of the day mortgage bonds closed up 31 basis points, up over 100 points from their low. What news came out to justify this switch? Not a thing. After the fact commentators came up with justifications for the switch, but the truth is it is all about market sentiment and this can switch on a dime. Traders and big investors are thinking that the worst is over, and they can see a time when the housing crunch is over and the economy is back on track. They can see it clearly, but we may have some valleys we have to cross before we get there. When we hit these valleys – or if there is even a hint that these valleys are out there – stocks will tank money will rush into mortgage bonds and rates will improve.

There is still a wide spread between T-bills and mortgage bonds, the market for Jumbo loans is still broken and ARMs are still priced out of the market. Investors still lack confidence in mortgage bonds, and mortgage wholesale lenders are holding back on their pricing to make up some of their losses. All this being said, there is still mortgage money available and this is a great time to buy a home. If you are thinking about buying a home in the Chicago area, or anywhere, and are ready to pre-qualify for a mortgage, let me know what I can do to help.

So where are we with mortgage rates? Rates are sharply higher than last week, but still historically low. 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.  The conventional loans 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 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    5.875%   6.064% APR

15 year fixed rate    5.50%     5.675% APR

5-1 A.R.M.               5.50%     5.675% APR      

7-1 A.R.M.               5.75%     5.839% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.75%     6.869% APR – Requires 20% down payment

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines – 75% loan to value, tighter ratios.)

7-1 A.R.M.*             5.875%      6.142% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS

With 1 point origination fee – 60 day lock

30 year fixed rate  5.75%       6.047% APR

With no origination fee –        60 day lock

30 year fixed rate  6.00%       6.246%

These are just a sampling of the mortgage rates available. Which option is best for you depends on your own specific goals and needs. The big question for next week is if the rally on Friday will carry though, or if it is a temporary blip in a worsening market. Stay tuned to find out more.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 11th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Over the last few months, the mortgage backed securities market has been extremely turbulent, moving back and forth in a wide range. This week we still had our ups and downs, but the range has narrowed. There were still a few days where wholesale lenders sent out intra-day re-prices, but overall this week was the flattest week we’ve seen in ages. We are sitting up near the top of the range for mortgage bonds, which means that mortgage interest rates are near the low point of the trading range. The question is, how long are we going to stay in these calm waters? Will we stay in this range, or are we about to break out of the range, either higher or lower?

The major mover in both stocks and bonds this week was the release of quarterly corporate earnings reports. The week started out with some rumors in the financial markets that the worst of the credit crunch was over. As one example, Washington Mutual, a big mortgage lender who has been hit hard by the credit crunch, was recapitalized with a $5 billion dollar cash infusion. This was looked at as a sign that good times were ahead and optimism reigned. But optimism can be a fickle thing in a soft economy. As companies released worse than expected earnings, the view switched back to concern that we still haven’t seen the end of the problems associated with the crunch. Washington Mutual did get their money, but later in the week they announced they were closing their wholesale mortgage division and many of their retail locations will be shuttered. The earnings releases were a mixed bag. Some corporations came in with better than expected numbers, but many were worse. The biggest surprise was the release Friday of corporate giant General Electric, the world’s second largest company. Their profit dropped 6% in the first quarter and they expect the whole year to be challenging. The mood in the markets turned from optimism at the beginning of the week to pessimism at the end.

In other news, initial jobless claims came in better than expected with 357,000 new claims compared to the 383,000 projected. But the 4 week average spiked higher, which means the job market is still in the dumps. A sure sign of a recession. The Consumer confidence index came in at a 26 year low. This is a sign that consumers are worried tapped out, and unlikely to pull any cash out for big purchases. Consumer spending has been the engine driving economic growth. This reading says that they are not about to pull out their wallets in order to rescue the economy. Another sign of a recession. The state of the economy and the housing situation has now become the biggest issue in the presidential campaign and in the halls of congress. Even John McCain, a free market Republican, has now insisted that the government get involved in a solution. It’s not clear what will come out of all this, but we are sure to see more plans to stimulate the economy and get the housing market on track.

As I have written before, with all the news on the economy pointing to a slowing economy, odds favor that when we do break out, it will mean that rates will drop lower. By all economic measures mortgage interest rates should be lower now than they are. The reason they aren’t is because the mortgage bond market is still broken. Investors still lack confidence in mortgage bonds, and mortgage wholesale lenders are holding back on their pricing to make up some of their losses. At the same time, rates are excellent now, and they may drop lower. If you are thinking about illinois mortgage refinance ? or are looking at houses and are ready to pre-qualify for a mortgage, let me know what I can do to help.

So how did all this activity affect mortgage rates? Again, relatively calm waters. Rates moved around but ended up close to where they were at the end of last week. 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. The conventional loans 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 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

30 year fixed rate 5.625% 5.746% APR

15 year fixed rate 5.25% 5.324% APR

5-1 A.R.M. 5.25% 5.324% APR

7-1 A.R.M. 5.625% 5.789% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.50% 6.613% APR – Requires 20% down payment

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M.* 5.625% 5.789% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS up to $410,000

With 1 point origination fee – 60 day lock

30 year fixed rate 5.50% 5.784% APR

With no origination fee – 60 day lock

30 year fixed rate 5.875% 6.246%

These are just a sampling of the mortgage rates available. Which option is best for you will depend on your own specific goals and needs. Next week retail sales will be released on Monday, and the expectations are for a bad number. The PPI and CPI, two big measures of inflation will also be released. This week has been calm, next week may be more choppy.

Illinois Mortgage Rates and News

In the mortgage industry, the present is looking more and more like the past. Back in 1992 when I first got into the mortgage market, George Bush was finishing his last year in office (though he didn’t know it at the time), a Clinton was running to take his spot and Brett Favre had just been picked up by the Green Bay Packers. A lot has happened in between, but another George Bush is finishing his time in the White House, another Clinton is running for president and now that Favre has finally retired he is threatening to un-retire and continue his reign of terror against our beloved Chicago Bears. In the mortgage industry the future is looking a whole lot like the past, too. Back when I first started there were two types of loans which covered the majority of lending options – conventional and FHA. Conventional mortgages were for those home buyers who had strong credit and a good down payment. FHA was for everyone else.

Back in the day, we put together loan packages which highlighted the strengths of the borrower, and showed that they met all the guidelines in regards to credit, income, job stability and having enough money to close, as well as a full detailed appraisal. With changes in technology and a strong national real estate market, mortgage underwriting loosened up a lot. The credit score became the biggest factor in the approval process. With a high FICO score lenders would overlook weaknesses in other areas. It got to the point where some of the biggest wholesale lenders were doing most of their business taking on loans where the borrower stated their income and assets without proving the figures were true. (Even the appraisal guidelines loosened and many loans were approved with just a drive by appraisal, or a computerized estimate of value.) These loans were sold as a way for well qualified borrowers to cut down on their paper work and to streamline the loan process. Unfortunately, this opened the way for abuses and led to “Liar’s Loans”, and some people who bought way over their heads, and couldn’t afford to make their payments.

It wasn’t until property values declined (not so much here in the Chicago area, but very sharply in some areas of the country) that the abuses in the system really showed. When home prices were moving up borrowers found a way to make the payment, even if it was by borrowing more against their home. Now loan defaults are up and mortgage lenders have found that old time religion again. This means we are back to the old ways of doing things, tighter underwriting for everyone, and FHA is again the best option for many borrowers and first time home buyers.

So what can you do if you are planning on buying a home or refinancing your mortgage and you want to make sure you present your self in the best light? Here are a few things you can do ahead of time to improve your chances of getting a loan at the best rate and terms:

1. Focus on your credit – One thing that hasn’t changed is that your credit score and your credit profile are still a crucial part of the loan approval. Make sure you review your credit before you need a loan. If you have problems, work on them when you still have time to get them fixed. Here is a series on credit that will help you understand your options, and show you how to increase your credit score.

How to understand and improve your credit score-part1

How to understand and improve your credit score-part2

How to understand and improve your credit score-part3

How to understand and improve your credit score-part4

2. Address problems up-front – If you have had problems of some type in the past, don’t try and hide them. In the mortgage process we look into all the information you present and verify everything. But some things that you may think are huge problems we may be able to work around. For example, if you have credit problems from the past that are hurting your credit score, FHA can still be an option. The key here is to show that you have moved beyond these problems and they are no longer an issue. To show this you will need to write a letter addressing any credit problems that show up on your credit report. In the letter you need to explain what happened, what you have done to correct the situation and why this isn’t a problem anymore. If you have any documentation to help your case, provide it. The same applies for other problems like job gaps and

3. Put together your documentation – The days of the no-doc loan are gone, so you will need to have documentation proving you make enough income to afford the mortgage payments and you have enough money or other assets to pay for the down payment and closing costs. This usually means putting together some simple documentation. In some cases we can get by with less, and in others we will require more, but this is a good list to start with -

W2s for the last 2 years (in some situations we will need full tax returns),

Your pay stubs for the last 30 days

Bank and investment statements for the last 60 days with all pages attached.

4. Have a plan – Do you know how much of a payment you can afford? Do you know how much cash you can come up with for a down payment and closing costs? There are still ways to buy with little or no down payment required, and there are ways to buy with no closing costs. If you have money to put down, where is it coming from? Will you still have money left over afterwards for other purchases or emergencies? You need to think about these things before you look for a home and applying for a mortgage. The answers to these questions will help you to decide what to look for and how you will finance it.

5. Get pre-approved for a mortgage – With all the changes in the mortgage market this step is crucial. A mortgage pre-approval will tell you how much of a loan you can qualify for and how much of a home you can afford. A good loan officer will take it a step further and help you to figure out the best way to structure your financing so it meets your long and short term needs. And if there are any problems, a good loan officer can also give you advice on how to put yourself in the best position to buy a home, if not now in the future.

The mortgage industry might have gone back to the past, but if you make a plan and follow through, there could be a new home in your future.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending April 4th, my take on the week’s financial news and how it affected Illinois mortgage rates.

This week was a good example of how bi-polar our financial markets have become. At the beginning of the week UBS, one of the biggest investment houses on Wall Street and a big player in mortgage backed securities, announced a loss of 19 billion dollars from its sub prime holdings. To me this would be looked at as bad news. This is a huge loss and a scary reminder of how Wall Street feasted on this junk, and how vulnerable these outfits are now to the risk from it. But that was just my take, and I am after all just an amateur. The professionals looked at it differently. They looked at this as great news. If the big players were writing down huge losses, this must mean the worst is over and we are about to turn the corner and happy days are ahead of us. The stock market had a huge rally (for a couple of days) and mortgage bonds tanked, sending mortgage interest rates higher. I hope they are right, but this seems like Alice through the looking glass, magical thinking. Some times bad news is just bad news.

By the end of the week we saw the other side of the coin. The monthly jobs report is usually the biggest mover in mortgage backed securities, which relate directly to interest rates. This report monitors employment, and the more people who are employed at good wages, the better the overall economy is. The opposite holds true, too. When employment is down consumers hold back spending and the economy suffers. I’ve talked before about how bad news for the economy is good news for mortgage rates, this is a prime example. The market was expecting a loss of about 50,000 jobs, and some news released earlier in the week showed a possibility that the number would come in much better than expected. The real number was a loss of 80,000 jobs, and the mortgage bond market skyrocketed, which meant that rates are again coming down. The other news in this report was a revision downward of jobs created in January and February to show another 67,000 jobs lost. So don’t be surprised if this month’s number turns out to be larger than expected when it is revised next month.

So what was the real difference between the optimism on the economy at the beginning of the week and the pessimism at the end? It was all perception and market sentiment. Mortgage bonds, and mortgage interest rates, are trading within a wide range. Volatility has been high, but there has been a ceiling and a floor, and the trading has bounced back and forth between these points. With the big run up in mortgage backed securities over the last few days, we are now starting to get close to the top of the range (which means the low end of the range for mortgage interest rates). In the past, as we hit that ceiling, mortgage bonds would bounce off of it and head back in the opposite direction, meaning mortgage interest rates would go back up. Chances are that at some point we will break through this range. With all the news on the economy pointing to a slowing economy, odds favor that when we do break out, it will mean that rates will drop lower. If you are thinking of illinois mortgage refinancing or are about to place an offer on a home, be sure and get your documentation into your mortgage lender ahead of time (or contact me, I welcome the business). You want someone who follows the market to help you time the best time to lock in your rate.

In other news, conventional ARMs are still out of the market, but some lenders are starting to test the waters again. Hopefully we will see more of a difference between fixed rates and adjustables in the coming weeks. Also, as FHA mortgages take up more and more of the slack from the tightening of conventional underwriting, we are seeing underwriting times get longer. If you are planning on buying a home or refinancing a mortgage and FHA is your best option, be sure to allow extra time for processing and closing your loan. We have some investors who are now taking up to 3 weeks for underwriting an FHA loan.

So how did all this activity affect mortgage rates? Although rates have moved a lot over the course of the week, they ended up close to where they were at the end of last week. 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. The conventional loans 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 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 5.625% 5.746% APR

15 year fixed rate 5.125% 5.274% APR

5-1 A.R.M. 5.375% 5.587% APR

7-1 A.R.M. 5.625% 5.789% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 7.126% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M.* 5.625% 5.789% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS up to $410,000

With 1 point origination fee – 60 day lock

30 year fixed rate 5.625% 5.897% APR

With no origination fee – 60 day lock

30 year fixed rate 5.875% 6.246%

These are just a sampling of the mortgage rates available. Which option is best for you will depend on your own specific goals and circumstances. Check back regularly to keep up to date on any changes in the market.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending March 28th, my take on the week’s financial news and how it affected Illinois mortgage rates.

There is a certain kind of action movie where the hero (heroine?) moves from one disaster to another, each time escaping just in the knick of time, but only momentarily before falling into even worse peril. That’s what the mortgage market has been like over the last 6 or 8 months, edge of the seat excitement and cliffhangers galore. Since the Sub Prime bubble popped, it’s been week after week of fear and excitement, companies imploding, mortgage programs eliminated, rate cuts and the mortgage rates moving up and down so fast it is hard to keep track. Compared to what has been going on, this week was uneventful and almost boring by contrast. Does this mean the markets are starting to calm down and get back to normal? Or is this just the calm before the next, bigger storm?

First, an update on the big news from last week. Bear Stearns, which was forced into a shotgun wedding with JP Morgan Chase as it was about to implode, ended up this week with a 500% increase as shareholders negotiated for a few extra bucks from their liquidation pricing. This is still an incredible loss of value in a short period of. There is still a question if there are other big players out there on the verge of falling, but for now things have quieted down.

The economic indicators were a bit mixed, but generally showed that the economy is still slowing down and inflation is in control. Durable goods, a measure of strength in manufacturing, was down 1.7% for the month, much worse than expected. Consumer confidence fell to 64.5, also much lower than expected and the lowest level in over 35 years. On the other hand, jobless claims came in slightly better than expected, 366,000 as compared to 371,000 anticipated. This is still a number that is consistent with our being in a recession. Consumer spending was flat, home sales improved, though they are still down, and inflation came in with in the range of Fed expectations. All this taken together suggests that the economy is either in a recession or a major slow down, and that the Fed will continue to cut rates.

Conventional mortgages are still tightening. As of the end of the month, mortgage insurance companies will no longer insure 100% purchases. Fanny Mae and Freddie Mac responded to this by altering their guidelines on the few 1005 financing programs they still offered, including DreaMaker, MyCommunity Mortgage, and Home Possible, all of which are programs targeted toward low and moderate income borrowers. These programs are still available, but they now require at least a 3% down payment. FHA guidelines even targeted a little. All the major lenders are now requiring a minimum credit score of 580 to qualify – still amazing in this market. It is now clear that FHA mortgages are going to be the best option for many borrowers here in the Chicago area, even those who could qualify for a conventional mortgage.

So how did all this activity affect mortgage rates? Over all, not that much. Rates were still volatile and worse off for most of the week. But on Friday, after the release of the inflation numbers, mortgage bonds went on a tear, finishing at their best level for the week. Rates are still slightly higher than they were last week, but not by much and the trend (for what that is worth) is for the better. We are going back and forth between a floor and a ceiling of resistance. Over the last few weeks, every time that it looked like rates were going to go much lower, they hit the resistance and bounced the other way. I think we will test this level again this week. If mortgage bonds break through it, mortgage rates should improve markedly. And this could happen any day. Or not. If you are thinking of refinancing your mortgage, be sure and get your documentation into your mortgage lender (or contact me, I welcome the business). Rates have been all over the board and there is no guarantee that if they drop lower, they will stay low.

As I’ve mentioned before, one of the bright spots for buyers, especially those with low down payments, is FHA. FHA, a government insured program, recently increased their lending limits. Here in the Chicago area the new lending limit for a single family home is now $410,000. With FHA there is no hit to the pricing for credit scores and you can buy with a low or in some cases no down payment. FHA is a great alternative for home buyers here in the Chicago area, even those who could go conventional.

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.  The conventional loans 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 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%      5.832% APR

15 year fixed rate    5.25%      5.337% APR

5-1 A.R.M.               5.50%      5.659% APR      

7-1 A.R.M.               5.75%      5.879% APR

For Jumbo loans over $417,000

30 year fixed rate*  7.125%     7.262% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M.              6.00%       6.174% APR

FHA LOANS up to $410,000 with 1 point origination fee

30 year fixed rate  5.625%       5.897% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program which offers no down payment and below market pricing.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending March21st, my take on the week’s financial news and how it affected Illinois mortgage rates.

The biggest story this week was what didn’t happen. At the end of last week the Fed stepped in to engineer an emergency bailout of Wall Street giant Bear Stearns. The company was near death as a result of its cash crunch and their heavy position in Sub Prime mortgages. It turned out that the Fed bail out was just triage, a temporary solution to the problem. Over the weekend the Fed worked with JP Morgan Chase, an even bigger Wall Street giant, to put together a deal to take over Bear Stearns and keep it from bankruptcy. The deal was put together and the news released on Sunday afternoon, right before the Asian markets opened. The surprising – no, make that shocking – part of the deal was the price. $2.00 per share! Bear Stearns (BS?) was worth about $68 per share just a week before (and $160 per share last year), so the market value had free fallen from about $3.5 Billion down to $236 Million in a matter of days. Now here is the part about what didn’t happen. If Bear Stearns had been left alone, its collapse would have started a panic which would have shaken our entire financial system. The Fed has been getting a lot of heat for not stepping in soon enough (from some) and for being too aggressive and fostering inflation (from others). This time they did what they needed to keep the whole system from imploding.

Disaster was averted, but it still wasn’t pretty. If the Street had been so wrong with Bear Stearns, how many other time bombs are still out there, ticking away? As I’ve said before, everything is rooted in confidence. If you believe the system works, that you will have value in your paper, the common belief makes it so. When belief disappears, the value disappears too. My guess is that most of the toxic mortgages out there are not nearly as toxic as feared. The worst of the worst, the sub prime, no income verification loans, even these have value. Many of these loans will continue to pay off with out a problem. I am willing to bet that someone is going to make a huge fortune working out the distressed portfolios. The Fed understands how important confidence is to the markets, and in addition to their role in the Bear Stearns deal, they took several actions this week which went a long way toward restoring confidence in the financial markets:

1. They cut the discount rate on Sunday (over the weekend!) by a .25% of a point, before the scheduled Fed meeting on Tuesday.

2. They made it possible for big broker dealers (like JP Morgan Chase) to borrow directly from the Fed, a privilege only available to depositary banks before.

3. They slashed the discount and Fed funds and discount rate by .75%, a huge, but expected, amount.

4. Restrictions were lifted from Fannie Mae and Freddie Mac allowing them to buy up to $200 billion in mortgages.

All these moves (especially the last one) went a long way toward stabilizing the markets. That doesn’t mean that volatility decreased, we saw some of the biggest swings of this wild year in both the stock and mortgage backed securities markets. It also doesn’t mean that we are now back to normal, or even that the worst is over. There is still a lot of fear and the markets are truly dysfunctional. What it does mean is that the Fed, and perhaps the government as a whole, understands what would happen if our system went down, and they have signaled that they are ready to step in and do what is necessary to keep things on going. While volatility this week was out of sight, by the end of the week on Thursday (the markets were closed for Good Friday), the market ended unchanged for the day. An amazing occurrence in these wild times. Though the economic indicators took a backseat to the other news this week, there were a number of indicators released, and the consensus reading is that the economy is slowing down but inflation is still a concern.

So how did all this activity affect mortgage rates? Mortgage rates are are moving down again. There are still a lot of problems in the market. ARMs have disappeared (temporarily, I believe), Jumbos are still out of whack and the mortgage lenders continue to tighten their guidelines. But fixed rates are coming back down, and we are on the verge of another illinois mortgage refinancing boom. If you are thinking of refinancing your mortgage, be sure and get your documentation into your mortgage lender (or contact illinois mortgage company, I welcome the business). Rates have been all over the board and there is no guarantee that if they drop lower, they will stay low.

As I’ve mentioned before, one of the bright spots for buyers, especially those with low down payments, is FHA. FHA, a government insured program, recently increased their lending limits. Here in the Chicago area the new lending limit for a single family home is now $410,000. With FHA there is no hit to the pricing for credit scores and you can buy with a low or in some cases no down payment. FHA is a great alternative for home buyers here in the Chicago area, even those who could go conventional.

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. The conventional loans 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, 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 5.625% 5.749% APR

15 year fixed rate 5.00% 5.148% APR

5-1 A.R.M. 5.50% 5.659% APR

7-1 A.R.M. 5.75% 5.879% APR

For Jumbo loans over $417,000

30 year fixed rate* 7.125% 7.262% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M. 6.00% 6.174% APR

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

30 year fixed rate 5.375% 5.794% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program which offers no down payment and below market pricing.

A lot of information is coming out next week, and there are sure to be surprises. Be sure to check back for more news and opinion. Have a great Easter.

Illinois Mortgage Rates and News