Illinois Mortgage Rates and News

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 the first installment of this series we looked at some of the things to look out for when shopping for your mortgage . In the second part we talked about hidden fees and pre-payment penalties.  The third installment covered APRs and how important it is to know how to read a Good Faith Estimate of closing costs.. In this, our last installment, I’ll go over what may be the most important factor in choosing where you will get your mortgage, reputation and integrity.

So many people focus on getting the lowest mortgage rate, but the lowest quoted mortgage rate isn’t always the best deal. I’ve heard too many horror stories over the years of buyers who were promised one rate, but when they got to closing they found the rate was higher, the costs were considerably more, or the program was different than what they were promised. If you got the bait and switch at closing (it’s illegal, but it does happen) you have two choices. One, you can walk away from the closing, possibly losing your earnest money, or two, you swallow your anger and go through with the deal. The problem is that the loan officer knows much more about how the system works than the consumer does. The mortgage application process can be intimidating, and you are signing a stack of disclosures, most of which no one reads. What your lender told you may be different from the documentation you signed. Mortgage lenders who are behaving in this manner are obviously not looking for repeat business. The companies that play these games are looking for the fast buck and don’t care about your long term value as a satisfied customer.

The reputation of the company, and loan officer you are dealing with, will go a long way toward predicting what kind of experience you will have. How did you get the lender’s name in the first place? Where they recommended to you by someone you trust? Word of mouth referrals can be a great way to choose your lender, especially if they were recommended by a Realtor or real estate attorney who has lots of contact with different mortgage brokers and mortgage bankers. Ask your attorney what he knows about the company or loan officer you are dealing with. If the company is active in his market area, he will know the reputation of the company and how reputable they are.

You can also check with the better business bureau and the appropriate regulatory agency (As an Illinois based mortgage banker I am regulated by the Illinois Department of Financial and Professional Regulation. Mortgage brokers and federally chartered banks are regulated by different regulatory bodies) to see if they have had complaints lodged against them. Here is a link to sites and phone numbers where you can check for complaints. Also, run the company’s name and the loan officer’s name through a Google search. In some cases you will come back with a lot of information, in other cases it will show nothing but the company web site. Some other things to watch for when choosing your mortgage banker or broker are:

Does the company have a reputation for meeting its commitments and closing on time?

Is the loan officer experienced and able to answer your questions?

Does the company have the financial stability to stand behind its commitment?

Do they have the resources to meet the deadlines in the contract?

Do you feel comfortable with your loan officer?

Does he get back to you quickly, and does he (or she) follow through when he says he will do something?

These are all questions that should be part of your decision. Until you close, you will rely heavily on your loan officer. If you have a loan officer who doesn’t return phone calls, or one who doesn’t provide information, or doesn’t communicate well with you, getting your loan will be a frustrating experience. If someone is not responding during the process, can you be confident that you will close on time and with the right terms? Keep this in mind when choosing who you want to work with. The rate quoted is only as good as the integrity of the person quoting it.

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

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. We are still in a bi-polar market with no consensus on whether our biggest problem is a rise in inflation or the fear of a coming recession. The big news this week showed how world events can move the mortgage market. Add in the Christmas vacation slowdown and it was another roller coaster week in the mortgage backed securities arena.

It is Holiday time and most of the bond traders took the week off. That meant the markets were thinly traded. On weeks like this a small volume of buying and selling can move the markets in a big way. The week started out following the trend from last week with mortgage bonds falling and interest rates moving higher. The expectation was that the week would be quiet and it appeared that the bearish trend in interest rates would stay in place.

Then disaster struck in Pakistan with the assassination of Benazir Bhutto the former Prime Minister and chief opposition to the Government. The chaos in Pakistan is bad news on a global level. Pakistan figures big in U.S. foreign policy because it neighbors Afghanistan, has a large contingent of Muslim fundamentalists and is a nuclear power. The thought of more unrest here sends shivers through the global investment community. Remember, bad news is good news for mortgage bonds. Stocks dived on the news and money rushed into the more stable bonds and mortgage backed securities benefited.

The economic news that came out Thursday also helped to improve interest rates. Durable goods orders came in much lower than expected, and jobless claims rose more than anticipated. Both of these indicators are signs that the economy is slowing down, and that the odds of a recession are higher. This increases the chance that the Fed will lower interest rates again at their next meeting in January.

The trend improved more today with the news that new home sales were down 9% to a 12 year low. This is actually good news for the real estate market. It will be hard for home prices to recover if builders continue to add new inventory. There were some other indicators which showed more of a mixed look on the economy – The Chicago Purchasing Manager’s Index rose higher than expected – but the dominant news in the thin market was bullish again and rates ended the week marginally better for the week.

The other big news in the real estate market was the release of the Case Schiller Home Prices Index . This shows the state of home prices throughout the country. Some areas showed double digit decreases in prices and the composite number was a decrease of 6.7% over all. The Chicago area fared much better with the decrease in value here a relatively modest 3.2%.

So this week the rates went from up to down, and ended up just about where they were at the end of last week . Again, looking at these rates is just a snapshot of where they ended up. There was a big swing from the highest point of the week to where we ended up at the lowest point. When you are shopping for a loan you need to be aware that rates can change quickly, and a rate quoted in the morning may have changed by that afternoon.

Here is what Illinois mortgage rates look like as of the end of 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 you personally, give me a call 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    6.00%      6.183% APR

15 year fixed rate    5.375%    5.494% APR

5-1 A.R.M.               5.75%      5.839% APR         

7-1 A.R.M.               5.875%     6.483% APR

For Jumbo loans over $417,000

30 year fixed rate    6.875%     6.904% 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    5.75%    6.043% APR

Next week is another short week and this too could be a thinly traded market with exaggerated ups and downs. There are a number of economic reports coming out next week, but the big release will be on Friday when the employment numbers come out. How this comes out will tell a lot about what to expect at the next Fed meeting, so this should be another wild week.

Illinois Mortgage Rates and News.

I just finished off my last minute shopping at the mall. My family get together’s were earlier, so this was just getting some odds and ends for the kids. I hate shopping, and I do tend to procrastinate so it’s not unusual for me to be out on Christmas Eve. What was unusual was the state of the mall. I usually need to park in the back reaches, a long hike from the stores. This year I parked close and had my choice of open spaces. The stores seemed less crowded inside, too. There was no wait at the registers and I was in and out of the stores in record time.

The part of Illinois I live in, Dupage County, is fairly well to do, so I can’t imagine that this is a direct reflection on the economy. People here may be concerned but it is not going to keep them from spending money at the holidays. More people may have done their shopping earlier this year, but the other times I was out it seemed the same.

Could the Internet be the difference? I know that I do more and more of my shopping on line. This way I can avoid the crowds, traffic and general hassle. The weather has been more winter like here in Illinois than it has in recent years, so that may be another factor for keeping people inside.

I am interested in seeing how the retail numbers do come out. The predictions were that this would be a slower Christmas shopping season, but the November numbers were higher than expected. Consumer confidence is down and credit is tapped out for many, so we will see if the December numbers follow this trend. How the sales turn out will help determine the trend in mortgage interest rates into the new year. If sales are slower than expected, that will be one more sign that the economy is slowing. This makes it more likely that mortgage rates will fall. If the retail numbers are better than expected, it means the economy is still strong, and rates will likely rise.

We will be hearing more soon, and when we do, I will post my take on what is going on and how it affects Illinois mortgage rates and your mortgage experience. I wish you all a Merry Christmas and a happy and joyous holiday season.

Illinois Mortgage Rates and News