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Mortgage Raate Update - Why are Rates Jumping So High?

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sat, 06 Jun 2009 13:41:37 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending June 5th, 2009, my take on the week's financial news and how it affected Illinois mortgage rates.

Schools out, summer is here, and mortgage rates are jumping. Mortgage rates are now at the highest point since last November, before the Fed stepped in and started buying mortgage backed securities in an attempt to lower mortgage rates and get the economy moving. Over the last 2 weeks there has been a mind shift in the financial markets. The biggest worry before was of the economy grinding to a complete halt. The markets bigger concern now is that the economy is growing too fast, and that the government is spending too much. The situation is similar to one of those optical illusions which look one way until you shift your perception, and then a different image forms and you can't see it any other way. Like the Witch which becomes a beautiful lady, once your mind has made that shift, it's hard to see the other picture the way you did before.

Several things have happened this week which give weight to this new view of the economy. Consumer confidence has improved, the ISM index, a measure of purchasing strength, came in higher than expected though still low. But the big shift this week was in employment. The unemployment report is the biggest report released each month. When more people are employed that means they have money to spend which keeps the economy active. More unemployment means not only less money to spend, but more fear from those who are still employed wondering if they are next. Since the last quarter of last year, when the financial crisis started, employment has been cliff diving. Each month this year has shown an extra five or six hundred thousand people newly unemployed. This month was projected as slightly better but more of the same and expectations were that the number would be around 525,000 jobs lost. When the number was released at 345,000, much better than expected, the fixed income markets sold off and mortgage rates jumped again.

But the employment report is a kind of an illusion itself. The 345,000 jobs lost was much better than expected, but in an economy which needs an additional 150,000 jobs created just to keep up with population growth, this is still a miserable number. And even though this number was better than expected, the unemployment rate rose by a half percent to 9.4%, the highest it has been since 1983. Even this number is understating the real situation and including discouraged workers and the underemployed the real rate is at 16.4%. Part of this is a result of the 2 surveys using different methods for figuring their data, and it is likely that the numbers will be revised for the worse next month. Still, the question is, how can such a bleak employment situation be grounds for optimism on the economy and fears that we are growing too fast? Is the economy really moving ahead, or are we just past the panic part, and now experiencing a severe recession, but not the worst that was expected before? At the beginning of the crisis, it was described as being like we were a ball which rolled off a table, and we were in a free fall. That feeling is gone now. The news is still bad, but there isn't that what happens next panic we had before, wondering if we would ever stop falling. The ball has hit the floor now and this is a bounce. The bond market is saying that we are going to bounce back too high and too fast.

It looks like we are over the worst and this is obviously good news. But I'm skeptical that we are in any danger of overheating any time soon. Unemployment is still going to be a big problem for a while. GM and Chrysler have just announced a whole range of cutbacks in their factories, dealerships and management. We are just getting a whole new crop of college grads coming into the work place now and prospects for them are slim. Anecdotally, this doesn't feel like fast recovery. I've talked to 2 friends this week who own small businesses. One has, for the first time in the 15 years he's been in business, laid people off this week. Another is holding off on lay offs, but they haven't paid themselves a thing over the last 2 months to keep everyone employed. I went out to dinner last week at a popular restaurant, and there were empty seats at 7:30 on a Saturday night. When we left, the place was nearly empty. These are just anecdotes, not data, but this makes me think we have a ways to go before we start worrying about inflation.

Fed Chairman Ben Bernanke is in a tough situation now. Fed buying has been the engine that has kept mortgage rates low for most of this year. With the bond market in revolt, and treasury rates spiking, the Fed buying isn't enough to make a difference. Two of the Fed presidents in speeches this week hinted that we may need to hike interest rates some time to cool things down. On the other hand, Bernanke is a student of the depression, and I doubt that rate hikes will be coming any time soon. The dilemma is that we are seeing improvement, but if the economy is going to be functioning at a sustainable level consumers have to lead the way. That will be hard as long as the housing market is still in the sick ward. Home sales have picked up, but there is still too much inventory on the market, and foreclosure are going to grow as long as the unemployment rate stays high. If rates stay high, this will knock the housing market down another notch, which will then do the same to the general economy. Low mortgage rates are a key part of the recovery plan, and the Fed doesn't want to see the half a trillion dollars they've already used turn out to be wasted money. The Fed will continue to do what it can to bring mortgage rates down and keep them low. But for this to work, the market needs to have another shift in thinking. The picture looks a lot like a beautiful girl now, but one bad report and the Witch face pop out again.

For now, the refinance market is dead, but with low prices and an $8,000 first time home buyer's tax credit the purchase market is still heating up. Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates 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 (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% 5.739% APR

15 Year fixed Rate 5.00% 4.136% APR

5-1 A.R.M. 4.75% 4.850% APR

For Jumbo loans over $417,000

30 Year Fixed Rate* 5.875% 6.057%

*Special pricing based on 75% LTV for purchase, 680 and above FICO single family homes up to $750,000 loan amount - pre-payment penalty applies.

7-1 A.R.M. 5.375% 5.453% APR

(For smaller Jumbo loans another option is to break your loan into 2 parts - conventional to the limit and a HELOC or second mortgage for the rest.)

FHA LOANS - 3.5% down payment - FHA Maximum varies by County

With 1 point origination fee - 45 day lock

30 year fixed rate 5.25% 5.879% APR

With no origination fee - 45 day lock

30 year fixed rate 5.50% 5.863% APR

FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances

VA Veterans Administration 0 Down Loans

With 1 point origination fee - 45 day lock

30 Year Fixed Rate 5.375% 5.548%

Call for information on no-cost VA Streamlined Refinances

These are just a few of the mortgage 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.

Illinois Mortgage Rates First time home buyer loans

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Illinois Mortgage Rates - Weekly Mortgage Market Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Mon, 10 Nov 2008 09:18:27 -0600

Welcome to Illinois Mortgage Rates and News week in review for the week ending November 7th, my take on the week's financial news and how it affected Illinois mortgage rates.

The big news this week was the election. After what has seemed like an eternity it is finally over. Now we have a break from negative ads for about a year before the congressional races start again. But now with Obama as our new President Elect, there is a little less uncertainty out there and we at least know who our leader is going to be going forward. This has already helped stabilize the markets. The waiting game is now focused on who he will pick for Secretary of the Treasury and what he plans to do about the economy. He has already said that the first priority is to put together a new stimulus plan. The first stimulus plan where the government sent everyone checks was a complete bust. This stimulus plan is expected to be tied to increasing jobs and building infrastructure. The advantage of this approach is that at least we will have something to show for it once the money is spent.

The news on the economy continued to be bleak, but there are real signs that the credit crunch is easing. The Libor rate, which spiked to nearly 5% when the credit crunch hit in October, is now down in the low 2s. This is a big benefit for anyone who has an adjustable mortgage that is about to convert. Now the conversion rate is likely to be in the low 5s rather than above 7 like it was a month ago. Other indicators are also showing the panic lifting in the credit market, though banks are still holding onto money rather than lending it out. The TARP program, also known as the bank bailout, was put into place to recapitalize the big banks and get them to start loaning money again. It looks like their plans for now are to hold onto the cash or use it for buying new companies. I'm not sure how this will change, but it will need to in order for the economy to recover. Overseas the British and European central banks both cut rates. With global rates low and so much money being pumped into the economy, lending should pick up over time.

Like I said before, the other economic news was pretty bleak. Ford and GM announced quarterly losses of 2.5 to 3 billion dollars. GM is losing money at the rate of about a billion per month and they expect to run out of cash next year if it continues like it is. The auto industry will be the next big bailout. The employment report came in at a loss of 240,000 jobs, a downward revision on last month's report showing more jobs lost and the unemployment rate rising to 6.5%. Job losses are accelerating, so it is going to get worse before it gets better.

There is good news on mortgage rates. Mortgage bonds have been fluctuating wildly and rates had risen over the last month even as all the fundamental factors pointed toward lower rates. On election day the mortgage bond market went wild with a rally of 113 ticks, a vote of confidence in the end of election season and knowing someone new will be in charge. Rates were off a little at the end of the week, in spite of the employment report which in a normal market would have caused rates to drop further, but we have seen about a 3/8s improvement in mortgage rates for the week.

Here is what Illinois Home 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 (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 6.00% 6.167% APR

15 year fixed rate 5.625% 5.728% APR

5-1 A.R.M. 5.625% 5.783% APR

For Jumbo loans over $417,000

30 year fixed rate * 6.50% 6.615% APR *

Special pricing requires 25% down payment or equity

7-1 A.R.M. 6.125% 6.239% APR

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 5.875% 6.327% APR

With no origination fee - 60 day lock

30 year fixed rate 6.125% 6.395% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

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

Weekly Mortgage Rates and Mortgage Market Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sun, 02 Nov 2008 19:36:29 -0600

Welcome to Illinois Mortgage Rates and News week in review for the week ending October 31st, my take on the week's financial news and how it affected Illinois mortgage rates.

I hope you've all had a Happy Halloween. Last year I bought what I was sure was going to be plenty of candy for the trick-or-treaters, but around 7:00, after a big pack of kids came by, we were nearly out of supplies. My goal is always to get through the night without too much leftover candy. I try not to have too many sweets around as we can all do better without them, but I hated the idea of being one of those guys who didn't have candy when kids came by. I ended up racing out to the store for reinforcements. And, of course, we didn't have another visit the rest of the night. This Halloween I decided I was going to be better prepared and bought one more bag than I had last year. The evening started out slow with no one coming by until well after dark. I live in an older neighborhood with bigger lots and longer driveways. It seemed for a while that kids were bypassing our area for a close by subdivision where the homes were closer together, which means a shorter walk for treats and more candy in less time. With no one coming by I thought that might be the case again this year. Then everyone came at once. They were in there own smaller groups, but all the groups hit at the same time. Supplies ran low again, I panicked and sent my son out for more treats. And, again, that was it for the night. Now we have several pounds of excess candy which I will eat, and regret. It turns out my original prediction was just about dead on, but I panicked and figured that the flood of kids would keep on coming.

I think we are starting to see the same thing in the markets now. In the last few weeks since the credit crunch hit, the over all sentiment on the economy and nearly all the markets has turned down right gloomy. The Consumer confidence index came in this week at 38, much lower than expected and the lowest reading since they started the index back in the 1960s. The stock market rallied this week, but even so the drop over the last month has been staggering. The news on the housing front has been similarly bad. On a year over year basis foreclosures are up sharply and values are down. The talk is that we are starting or possibly hip deep in a recession that may be much more serious than any we've seen in years. There is no doubt that these are scary times, and I expect that things will get worse before they get better. But it is also clear that we are still in panic mode and the markets usually bottom out long before the economy improves. I'm thinking we are much closer to the bottom than most people realize.

Just a couple of months ago the biggest fear was inflation. Oil prices were up to $149 per barrel, and there were predictions that it would hit $200 within the year. Oil closed Friday at around $68 per barrel. The drop in oil and other commodities works like a pay increase to most consumers, paying less for gas gives them a little more for other expenses. Then you look at all the money that has been pumped into the economy over the last few months through the government's drive to contain the credit crunch and avert the worst of the down turn. So far we haven't seen much benefit from this huge infusion of money, but in the long run this will have an effect. There are signs that the credit crunch is slowly easing (the Libor and the Ted spread are coming down). Some of the panic is psychological. The election is just a few days away, and I think that everyone is anxious to have the election over, and having a new leader should boost confidence in the future. If the polls hold out and it is Obama, he has promised a $300 billion stimulus plan which would send money to strapped state governments, and build big infrastructure projects. This is aimed at getting more jobs and more money flowing. Expect more programs like this to come.

The Fed this week lowered their Fed funds rate down to 1%, the lowest it has been since 2003 and 2004. The problem now isn't that money is too expensive, but that banks are still afraid to lend. But all these signs point to a change coming. The combination of low rates and all this money being spent should do the job of priming the pump over time. There are other bits of good news out there. The US is still considered the safe haven for global money, and as the wave of panic crested globally, money flowed into dollars and T-bills. So even if we don't have confidence in our economy, global investors still do. Some astute commentators are saying that we are near the bottom in the stock market (others say we have a ways to go yet). In the real estate market, home sales were up over the previous month in September and inventory actually fell. This was before the credit crunch really hit, so my guess is the October number won't be so good. But what this does mean is that there are a lot of buyers out there, mostly first time home buyers without a home to sell, who are seeing the market as a bargain, and waiting for the right time to jump in. When ever the government sets monetary policy they have a tendency to overshoot. Right now deflation is the biggest concern, but down the road, with a few trillion more dollars pumped into the system, inflation could be the biggest problem. We are hitting the time of year when home sales naturally slow down, but I think there is a good chance that this winter could be the bottom of the market.

Mortgage rates are still trying to find direction. Mortgage bonds were worse most of the week, but after hitting a support level near their worst point for the year, they started to improve. All the indicators point toward lower mortgage rates and if this were a rational market rates would be considerably lower. But we are still in an irrational market where investors are afraid to own anything, so it may take some time before things normalize. If you are in the market for a mortgage, give me a call and I can help you figure out not only your qualification, but also help you with the timing and picking the right time to lock in your mortgage.

Here is what Illinois Home 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 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

The Truth About

30 year fixed rate 6.375% 6.548% APR

15 year fixed rate 6.00% 6.137% APR

5-1 A.R.M. 5.625% 5.783% APR

For Jumbo loans over $417,000

30 year fixed rate * 6.50% 6.615% APR *

Special pricing requires 25% down payment or equity

7-1 A.R.M. 6.25% 6.329% APR

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 6.25% 6.727% APR

With no origination fee - 60 day lock

30 year fixed rate 6.50% 6.759% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

What the @#$! is Going On With Mortgage Rates?

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sat, 01 Nov 2008 09:42:57 -0500

If you've been following interest rates lately, you might have whiplash. Rates have gone up, then back down, then up again. And that's all in the same day. Over the last year mortgage rates have been more volatile than at any time in the nearly 17 years I've been following them. But in the last few weeks, since the credit crunch hit, the volatility has gone through the roof. Mortgage rates have tested their high point for the year, then swung around and dropped to the best rates we've seen in the last few months, before swinging back the other way and nearing the yearly highs again. What is going on with mortgage rates?

In normal times, mortgage rates go up and down based on activity in the mortgage backed securities market, and the prices move based on how traders read the state of the economy and the possibility of inflation in the future. Inflation brings down a bond's yield, so any hint of inflation is going to decrease the value of a mortgage bond, meaning interest rates will go up. On the other hand, when the economy is slowing down this means that the yield is safe, so more investors buy in and mortgage rates go down. That is how it works in normal times. But these aren't normal times.

All the economic reports point to a slowing economy, which should mean that rates go down. But that hasn't been the case. Oil and commodity prices have dropped like a stone in the last two months. This should have made rates go down, but it didn't. Unemployment is up, and so are foreclosures, while the stock market and home values are down. All of these should mean that rates are going down. Yesterday the consumer confidence index slipped to an all time low, and mortgage rates got worse. In fact, the normal concerns of inflation and economic slowdown don't seem to have any correlation with mortgage rates now. So again, what is going on?

I think there are two explanations for what we are seeing, de-leveraging and panic. I've talked about de-leveraging before. This is like a margin call on the markets. Big investors, including mutual funds and hedge funds, have borrowed heavily to leverage the return on their investments. This strategy works great when the market is going up, a small amount of money controls a bigger investment and the returns are magnified. But what works well on the way up can be a killer on the way down. The losses are now magnified and in order to pay back the losses, investors are forced to sell everything they have - the good as well as the bad. The other explanation is panic. In a time of uncertainty everything is suspect and nothing does well. This needs to play itself out and confidence needs to return before the markets can stabilize.

But I do see two things which make me think that mortgage rates are still likely to go down.

1 - The risk for holders of mortgage bonds has gone down. Now that the Government has taken control of Fannie and Freddie mortgage bonds, are nearly as safe as treasuries. So as long as there is faith in the US economy (So far, so good. The dollar has gone up during this crisis) having the US government standing behind them, mortgage bonds should out perform other investments from a risk standpoint.

2 - The goal of the Fed and the Treasury is to get the economy growing again, and in order to do this the housing sector needs to get healthier. Treasury Secretary Paulson has said that one goal is to get mortgage rates down so that home owners have an incentive to buy. That hasn't worked out so well yet, but over time it is likely.

The Fed is expected to cut the Fed Funds rate today by .50%. This will mean that rates for business loans and home equity loans drop, but it won't necessarily help mortgage rates. Often mortgage bonds worsen after the Fed cuts rates. But usually within a week or so, the market sees a benefit and rates do drop. No one knows the timing, and in this crazy market there are no hard and fast explanations. But don't be surprised if rates do start dropping again soon.

Illinois Mortgage Rates weekly Market Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Mon, 27 Oct 2008 09:12:16 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending October 24th, my take on the week's financial news and how it affected Illinois mortgage rates.

At the end of last week and the beginning of this week, it was starting to look like the markets were chilling and the real panic was over. Maybe not. The world wide panic has shifted from worries about the credit crunch to worries about the severity of the global recession. One trader defined this market as periods of panic interrupted by moments of calm. It is not just people or investors panicking, but the banks themselves. The banks are still afraid to lend money, and with all the markets in downdraft, investors are having to sell whatever they have, good, bad or ugly, in order to raise cash (except for treasury bonds, money is rushing into the safety of T bills). In a way this is like a margin call on the entire global economy. When you buy stocks on margin (with borrowed funds) and the stocks go up, a small investment can turn into a big return. We are seeing the opposite of that now. As prices of nearly every asset class drop, the banks, investors and other market participants need to come up with extra cash to meet their margin calls. With prices down they need to sell more in order to come up with the cash required, and this feeds into a downward spiral where lower prices feed more selling which means the prices drop even lower.

The remedy for this is two things, confidence, and liquidity. Governments, both here and abroad, are doing everything but dropping money from the sky, so liquidity is coming into the system. Confidence could take longer. The US is still looked at as the economic leader, in spite of all our problems, and having a lame duck president with almost no economic credibility is not helping to inspire confidence. The election just over a week away won't solve the problems, but just knowing someone else will be at the helm may help to restore confidence that better times are coming down the road.

Some good news came out of the real estate market this week as existing home sales unexpectedly jumped by 5.5% last month. This was the biggest increase in 5 years. This is a sign that buyers are coming into the market as home prices drop. This is also a sign that the foreclosures that are now a big part of this market, are being absorbed. This does put pressure on the values of all homes, but it also means we are getting closer to equilibrium. Builders are not putting much new inventory on the market, and there are a lot of first time home buyers waiting in the wings, so we may be closer to a bottom than many people think.

All the economic reports continue to point to a recession and the big question now is how long and how deep it will be. Commodity prices are falling, oil is now down to around $65 per barrel, and gas prices are dropping like a stone. I don't think this is going to make anyone want to rush out and buy a Hummer, but it will help ease the stress on budgets. Former Fed Chairman Alan Greenspan went before congress this week and basically said he'd screwed up. He said that he never saw this coming and he was sure that markets would regulate themselves better than the government ever could. All our financial turmoil now is a result of a flaw in the system he didn't realize was there. We will be seeing a lot more regulation going forward.

Mortgage bonds started out the week with a huge rally. Rates improved through Wednesday when we were quoting some 30 year fixed rates at 5.875%. But volatility is still the rule, and despite a lot of good reasons why mortgage rates should be heading further down, bonds sold off heavily Thursday and Friday, breaking through support levels and ending the week at the worst point for the week. Mortgage rates are slightly better than where they ended last week, but much worse than where they were on Wednesday. This wide swing in mortgage bonds and mortgage rates has been the pattern over the last months. If you are in the market for a mortgage, the best thing you can do is understand how rates change, and be in a position to lock in when the opportunity presents itself. I expect that rates will drop again, but in this market there is no guaranty that they will stay down.

Here is what Illinois Home 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 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

The Truth About

30 year fixed rate 6.125% 6.254% APR

15 year fixed rate 5.875% 6.026% APR

5-1 A.R.M. 5.625% 5.783% APR

For Jumbo loans over $417,000

30 year fixed rate * 6.50% 6.615% APR *

Special pricing requires 25% down payment or equity

7-1 A.R.M. 6.25% 6.329% APR

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 6.00% 6.632% APR

With no origination fee - 60 day lock

30 year fixed rate 6.50% 6.759% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

Expect the volatility to continue this week.

First Time Home Buyers - Is it the Right Time to Buy a Home Now?

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Fri, 17 Oct 2008 14:04:12 -0500

It is always a leap of faith to do something for the first time, and first time home buyers who are in the market to buy a home now need to take a bigger leap than normal. These are scary times in the real estate market. Home prices are down sharply from where they were last year, or even over the last several years. The credit crunch has morphed into a financial crisis and it looks like we are in a recession, and the recession may get worse before it gets better. Financing is tighter than it was before and you will need to have a down payment in order to get a mortgage. Being a first time home buyer is always scary but with fear in the air the safe thing to do is to sit on the sidelines. Or is it?

There is no way to know when you reach the bottom of a market, and if you buy your first home now you may be buying early. (But buying real estate should never be looked at as a short term decision. If you are buying a home you need to plan on being there for a minimum of 5 years.) But a few years back when everyone said real estate was the thing to get into, this was the same time when prices were the highest. When home prices were at their peak they looked like they would continue to go up. Now when home prices are much lower, most people are convinced that they will continue to go down. In the stock market, one school of thought is called contrarian investing - the idea that crowds are usually wrong, too optimistic when things are good and too pessimistic when the market is bad. The idea here is that the best time to buy is when the mood is bleakest and conventional wisdom says it is the worst time to buy. I've talked before about how greed and fear move the markets. It works the same in the real estate markets.

Here are some reasons this could be the right time for a first time home buyer to buy their home now or over the coming months:

With the credit crisis reaching a head, boatloads of money have been pumped into the economy. It was necessary to pump this money in to restore confidence, but we won't see the results of this pump priming for months. There is always a lag in the system, but this added liquidity will be felt, probably starting next spring.
The banks will start lending again now that the government is investing in the biggest banks and guaranteeing so many loans. This takes some of the risk away and makes it easy for lenders to lend. This won't mean we are going back to the easy credit period we were in, but we won't be strangled by lack of credit.
The real estate market has been going down over the last few years, before most people really realized it, and prices are already down a by lot. Looking backwards, the risky time to buy was when the market was the hottest.
Real estate is negotiable. The properties that are selling now break down into 2 main categories, sellers who are motivated to sell, and bank owned properties or short sales.
Mortgage money is available, there are first time home buyer programs where you can buy with a low down payment, and mortgage interest rates are low. When the economy and the home market pick up, rates may be much higher, so your monthly payment would be higher, too.

I'm not saying that the economy is going to improve right away, it is likely to get worse. I don't see home prices jumping higher any time soon, either. There are too many homes on the market now, and inventory is likely to grow as the economy worsens. At the same time there is a huge pent up demand of first time home buyers who want or need to buy a home, but have been sitting on the sidelines waiting for the right time to get in. At some point the buyers will jump in, and we will shift from a strong buyer's market back to a sellers market.

First time home buyers may have a great opportunity now and in the coming months. You need to look at your situation and see what is right for you, both now and over the long term. As scary as it looks now, buying in a down market may be the best thing you can do.

If you are a first time home buyer or want to know exactly it takes to buy a home and get a mortgage in today's market, click here for a Free, Home Buyer's Guide.

Chicago Area Tax Bills are Out ... and UP - How to Appeal Your Real Estate Taxes

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Thu, 09 Oct 2008 21:26:03 -0500

Cook County tax bills were sent out last week, and for a lot of homeowners the bills were a big surprise - and not in a good way. My phone has been ringing with home owners wondering how their taxes moved up so sharply. Home values have trended down over the last few years, but accessed values have moved up, in some cases by a lot. The problem is that properties are re-accessed every 3 years (each township rotates so they are not all done at the same time), and this year the re-assessment comes at a time when legislation has phased out some tax caps, so the result is a spike in tax bills while the value of their home is lower.

The real estate tax system is complicated and there are a number of factors that go into calculating the tax bill. The first thing to do is to check your bill and make sure you are getting all the correct exemptions. If you aren't getting your homeowners exemption this could make a big difference. But one of the major factors is the property's accessed value. If you can show that the accessed value is higher than the home's real value, you may be able to get your tax bill lowered. There are attorneys and specialists who do this regularly and charge you a percentage of the taxes you saved. Or you can do this yourself.

If the property was purchased within the last 3 years, the assessor will base the new accessed value on the sale price. This might not help you if you bought when the market was still moving up, and now it is down from what you paid. If you've owned the home longer, your accessed value will be based on what comparable homes have sold for recently.

Here is the link to what you need to do to appeal your property taxes in Cook County. ... there's more here ...

Pointing Fingers - Was it CRA and Minority Lending that Caused the Mortgage Mess?

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Thu, 02 Oct 2008 09:30:47 -0500

I think it is safe to say that our economy is in a mess. The mortgage crisis and the panic in the stock market are now front page news. The credit crunch that has been festering over the last year has now come to a head and it looks likely that we are in for a deeper recession than many had hoped. When things go bad it is human nature to point fingers and try to access blame. Over the last few weeks I have gotten several emails and seen one video that claim the housing mess came about from too much government mandated lending to low income and minority home buyers. There is plenty of blame to go around, but Wall Street didn't gorge itself on CRA (Community Reinvestment Act) and low income housing loans. These loans are low profit and banks do as little as they can to keep in compliance with the laws. The loans that got us into the situation were the high risk, high profit sub prime and no income verification loans.

The emails I've been seeing point specifically to the CRA, which was passed in 1977 and expanded in 1995. The idea behind this act was to increase lending in areas that had been blighted, and to make loans available to low and moderate income borrowers and small businesses who were otherwise unable to get financing. Red lining, banks not willing to lend in areas with high minority concentrations, was a big problem in the real estate industry. The idea behind this and similar laws was to make it so larger banks couldn't discriminate against borrowers based on the area of the home, and make it possible for these areas to improve. These loans were all fully underwritten and the borrowers had to show an ability to repay the loan. Often times these loans spark a renovation in the otherwise blighted neighborhood. We've seen this in action in Chicago. All across the city, neighborhoods that had been down for the count, have now been revitalized. Over the last years there were other initiatives to increase the home ownership rate in both the Clinton and Bush administrations. These programs have had higher default rates than standard conventional loans. But not to an excessive degree, and compared to the overall mortgage market they were just a small drop in a big bucket.

The root of our current crisis comes down to the flow of money and the desire to make a higher return. ... There's more ... read the rest here

Illinis Mortgage Rates - Weekly Mortgage Market Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sat, 27 Sep 2008 13:48:28 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 26th, my take on the week's financial news and how it affected Illinois mortgage rates.

This week the markets were in limbo as everyone waited for congress to approve some version of the financial bailout bill. The original Paulson proposal has been changed around so there is now more transparency and accountability. At several times over the week it looked like an agreement was about to come together, but politics came in the way as neither party wanted to take the blame for what is sure to be an unpopular program. Even as groups of economists said that this isn't the right way to handle the crisis, the risk of not doing something quickly was judged as a bigger risk. The markets were fairly calm, but the expectation is that an agreement will be in place over the weekend, before the Asian financial markets open Sunday night.

Some sort of bill is likely to be passed, but the question is, will it be enough? Our entire financial system has been on life support for most of the past year. Ever since the bubble popped in the mortgage backed securities market, the financial markets has been close to frozen. When the system is working, banks lend money to each other and money flows smoothly. This is all based on confidence that whatever money is lent out will be repaid as agreed. Now, with so much toxic debt in the system, the banks are afraid to lend to each other. This is a crisis of confidence that has worked its way from Wall Street down to Main Street, and the fear is that if this isn't resolved soon, it will cut off credit to businesses of all sizes forcing us into a recession. The idea behind the bailout bill is that using up to $700 billion of tax payer money to buy up the bad debt, it will recapitalize the banks and the banks will then start to lend freely again.

But we could be in a recession already, or at best, the economy is slowing down sharply. Washington Mutual, one of the biggest banks in the country went belly up this week, the GDP for last quarter was down graded sharply. Jobless claims were up and home sales and durable goods orders were down. All of these things would have been huge news in a normal week, but were just side notes this week. With the economy slowing, will this bailout be enough to get the economy back on track? If the banks and investors are still nervous, what is to stop them from holding on to the money they get instead of lending it out freely? Odds are that we are still in for some economic contraction. What does the government have left to offer if this doesn't work? ... There's more..

Do You Lock in Your Mortgage Rate, or Do You Float when the Markets are Nervous?

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Wed, 24 Sep 2008 08:59:12 -0500

Have you ever watched the TV game show The Price is Right? The most compelling part of that show is when the contestant has already won something, but they are now faced with a decision. Do they want to keep what they have, or trade it in for the unknown? What lies behind door number two? Is it a fabulous prize like a new car or a trip around the world? Or is it a goat and a wheel barrow? I think it is human nature to always want more, and when I watch the show I find myself rooting for the contestant to take the chance and go for the glory. But if they get the boobie prize, it is easy to feel kind of smug. They should have been happy with what they already had. When you buy a home or decide to refinance your mortgage, you are faced with the same kind of decision. Are you happy with the rates you are offered? Or do you risk it all by going for the unknown and taking your chance on what lies behind door number two?

Once you have decided on a mortgage company and started the mortgage process, one of the first decisions you make is whether or not to lock in your interest rate. This means you have a choice, locking in your interest rate guarantees that this is the rate you will have at the closing, no matter how high mortgage interest rates may rise. On the other hand, you can float the rate, which means you are taking a risk, but you have a chance to get a better rate if mortgage rates improve. One of the services I offer my clients is to keep them informed of what is happening in the mortgage backed securities markets, and let them know about any news that could affect mortgage rates. There are times when the mortgage market is improving and the odds strongly favor rates coming down. At times like this it may make sense to float for a bit and take advantage of the trend. There are other times when the odds say that rates will move higher. At these times the best thing you can do is lock in your rate and be able to relax and sleep at night. Then there are times like now when the market volatility is on steroids and the rate swings are hair raising, but you don't know if rates are trending up or falling down.

Mortgage backed securities (which mortgage rates are based on) have been volatile all year. Intra day price changes (where lenders change there prices during the day) used to be a rare occurrence. Now it's normal to have prices change at least once during the day, several times a week. This whole past year has been volatile, but in the past couple of weeks we have really kicked it up a notch.... there's more

Illinois Mortgage Rates Weekly Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Mon, 22 Sep 2008 08:06:51 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 19th, my take on the week's financial news and how it affected Illinois mortgage rates.

I expected this to be a wild and volatile week. I never expected it to be this wild. There was a near melt down in the financial markets and at the end of the week in an unprecedented move, the government was putting together a bailout of the entire banking system. Ever since the credit crunch kicked in over a year ago, the economy has been crippled by a lack of credit. All this goes back to the banks and brokerage company's exposure to bad mortgage loans. While the real estate market was hot, they loaded up on loans that seemed risky at the time, and down right stupid in hindsight. It was a herd mentality that said risk didn't matter as long as home prices continued to rise. When the bubble popped, the market for these securities disappeared overnight. Pools of theses riskier mortgages (Sub prime and Alt A loans) which used to sell for a premium, were suddenly so toxic that investors wouldn't touch them at any price. The economy runs by money constantly changing hands. All these loans were like a game of hot potato or musical chairs. You were safe as long as the music was playing and the money and loans were being passed along to the next in line. But when the music stopped, these financial companies were stuck with billions of dollars of loans that they couldn't sell. Their balance sheets overloaded with debt, they had trouble borrowing and cut back on who they would lend to. With less credit available, the economy has contracted and the real estate market has continued to fall, cutting the value on their collateral causing the entire market to cycle lower to the point this week where the system almost collapsed. Now the government is stepping in with a plan to buy out all the non-performing loans at a deep discount, as a way to bring liquidity back and get the banks to start lending again.

This week started out with Lehman Brothers forced into bankruptcy and insurance giant AIG being virtually nationalized by the government to keep it from failing. The Fed along with a consortium of other national banks extended another $250 billion dollars of credit into the financial system. There's More ...

Scary Times In the Financial Markets Could Lead to Opportunities

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Thu, 18 Sep 2008 11:13:15 -0500

These last few weeks have been scary times in the financial markets. It felt like an earthquake a little over a week ago when the government stepped in and took over mortgage giants Fannie Mae and Freddie Mac. The ground shifted on Wall Street again this weekend as the feds declined to save Lehman Brothers, letting one of the biggest players on Wall Street go bankrupt as a result of its exposure to bad mortgage loans. Bank of America also bought out Merrill Lynch this weekend for pennies on the dollar, avoiding another big name bankruptcy. The earth moved again Tuesday night when the US government stepped in to save AIG, a huge international insurance company that was overloaded with credit swaps linked to mortgage debt. The AIG deal is structured as a 2 year loan of 85 billion dollars in exchange for 80% of the company's equity. AIG has a tremendous amount of assets, but if it was forced to liquidate quickly at fire sale prices, it would wreak havoc on the financial markets. So unlike Lehman Brothers it was considered too big too fail, and chances are good that the Fed will get our money back. The earth is still shaking, and with companies like Washington Mutual and Morgan Stanley still on the brink, we know there are still many aftershocks to come. Is it time to panic yet?

This mortgage crisis is showing how interlinked our financial system is. This isn't just happening here, repercussions are being felt across the globe. The stock market has had an awful week, and even the safest investments like money market funds are affected. This is a crisis of confidence in our entire financial system. The use of derivatives, complicated financial instruments like collateralized debt obligations and credit default swaps which slice and dice a pool of mortgages or other financial assets into a variety of new investments, is at the heart of this crisis. The goal of these products was to increase return and cut the risk for the investor. But the truth was that the derivatives were so complicated that most investors had no idea what they were really buying, and what the true risk of the underlying assets were. These derivatives were sold based on the confidence that someone knew what they were doing, and that the risk and returns were as advertised. That has turned out not to be the case, and investor confidence is shaken. There is no doubt that these are scary times.

But this isn't the end of the world if you are able to look at this with a long range perspective. The government was late figuring out that this was a problem, but they are now very actively managing the crisis. This morning the Fed stepped in with a consortium of foreign central banks and pumped another 247 billion into the financial system in an effort to increase liquidity and boost confidence. The impression is that what ever needs to be done will be done.

So the question is, how does this affect you as a home buyer or home owner, and what can you do now?

Don't panic - If I could go back in time, I'm sure I would have done some things differently. But what is done is already done and it is too late to change. There will be more bankruptcies and more shocks to the system in the weeks and months to come. But I'm guessing that we are a lot closer to the bottom now than we were before.

Focus on the long term - I try not to look at my stock accounts or 401k balance too often, especially lately, because I know I'm not going to like what I see. At the same time I'm not planning on spending the money anytime soon, so the loss now is just on paper. It is the same with my house. I know it was worth a lot more a few years ago than it is now, but I don't plan on moving any time soon, so the paper loss I have now is no more important than the paper gain I could have sold it for a few years back.

Take advantage of opportunities - In every crisis there is an opportunity. The old saying is that the time to buy is when there is blood in the streets. The housing market has seen its share of blood lately, and if you are willing to go against the crowd, this is a time where you can find some real bargains. House prices are much lower than they were over the last several years, and sellers are starting to accept the reality of the market. Interest rates are also near their low for the year, so you can buy more of a house at a lower interest rate than you could before.

The same thinking applies if you already own your home and have no intention of moving. The bad news in the economy could be an opportunity for you to improve your own financial position. The low interest rates we are seeing could allow you to refinance your higher rate mortgage for a lower interest rate mortgage. Or get out of your adjustable rate loan and into a more stable fixed rate. You should also look at your over all debt structure. If you have a lot of credit cards and consumer debt, the equity in your home could be restructured to pay off your debts and roll it into your mortgage, which could save you hundreds of dollars per month, giving you some extra breathing room. Rates are low now, take advantage of the low rates while you can.

Put yourself in the best situation for later - With the problems in the financial industry, it is harder to qualify for a mortgage than it used to be. Maybe you aren't able to take advantage of the opportunities now, but you can work on improving your position so you can be in a better position soon. That could mean fixing some problems with your credit, or saving for a down payment. Working on your problems now will help you get where you want to go later.

There is no question that these are scary times, but my guess is that we will get through this and our financial system will be stronger in the end. If you take advantage of the opportunities as they present themselves, you could be in a stronger position, too.

Illinois Mortgage Rates - Weekly Mortgage Market Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sat, 13 Sep 2008 10:19:11 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 12th, my take on the week's financial news and how it affected Illinois mortgage rates.

It's beginning to seem like all the most important news happens on the weekends. At least that's the case in the financial markets lately. Last week the big bombshell was the government takeover of mortgage giants Fannie Mae and Freddie Mac. This takeover was something that had long been expected, but it wasn't looked at as an imminent event. After all, just a month before, the Fed and the Treasury made a joint statement that they were fully prepared to stand behind Fannie and Freddie. There has always been an implicit guarantee that the government would step in if necessary to keep the mortgage market functioning, but the guarantee made it official. Only this wasn't enough to restore confidence to the markets. Fannie and Freddie's stocks remained on death watch, and the markets remained in turmoil. So last Sunday morning the Treasury pulled the trigger and the entire mortgage landscape has now changed.

The immediate impact of the bailout was that mortgage bonds soared on Monday and mortgage rates dropped down to the levels they were at last Spring. But so far this has been a one day rally. Mortgage rates are dramatically better, but are now going back and forth in a tight pattern. The big improvement in rates was a result of mortgage bonds now being seen as much lower in risk than they were before the government stepped in. As part of the rescue agreement, the Treasury also indicated that it would be buying up mortgage backed securities. This should mean that rate will drop lower, but in order for that to happen, bond market investors will need to come into the market stronger than they have up to now. So the question is, what are they waiting for?

One thing could be is that it's a weekend again. Several big companies are in trouble. California banking giant Washington Mutual is near the end of the road and said to be in buy out talks with JP Morgan Chase. And investment house Lehman Brothers, another big player in the mortgage security market, is also on the verge of breakup. The question here is if the Treasury is going to step in and fund these transactions, too. Fannie and Freddie were too big to fail, but if the government continues to fund these buyouts, it dilutes the value of government debt and erodes the value of the dollar. Corporate welfare is a growth industry now, and it's not just the financials. GM and Ford are hoping for handouts, too. Being that most of the buyers of our bonds, both mortgage and T-bills, are foreign governments, this is a huge concern.

Most of the reports issued this week showed more proof of a slowing economy. Retail sales were much worse than expected (the stimulus checks have now all been spent) for the second month in a row. Jobless claims again came in high, again. And producer prices were down, a signal that inflation is coming under control. This is a function of oil prices, which are now just over $100 per barrel, their lowest price in months. All that news is bond friendly (bad news is good news for mortgage rates) and reason to expect that rates will dip lower. On the other side, the consumer sentiment index came in 10 points higher than expected, a sign that consumers, at least this month, are feeling a little more optimistic about the economy.

Mortgage rates dropped about 3/8s of a point this week and are now at the lowest point in months. Fixed rates have come down a lot. Adjustable rate mortgages and Jumbo loans haven't had the same move, yet. The mortgage bond market finished the week on a down note, with mortgage rates rising for the day, but still strongly down for the week. What this all means is that if you are in the market to buy a new home, or if you've been thinking about refinancing your mortgage, this is a great time to get a mortgage. If you need help, give me a call.

Here is what Illinois Home 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 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 5.75% 5.849% APR

15 year fixed rate 5.50% 5.629% APR

5-1 A.R.M. 5.375% 5.476% APR

For Jumbo loans over $417,000

30 year fixed rate 6.50% 6.615% APR

7-1 A.R.M. 5.875% 6.042% APR

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 5.50% 6.124% APR

With no origination fee - 60 day lock

30 year fixed rate 5.875% 6.316% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

Next week along with several important economic reports being released, there is also a Fed Open Markets Committee meeting (no one expects them to raise rates) and the continued fall out from the Fannie and Freddie bailout. I expect another volatile week.

It’s alive??? Chicago, IL FHA Down Payment Assistance Programs May be on Their Way Back

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sat, 13 Sep 2008 10:15:38 -0500

Not so long ago it looked like the FHA Down Payment Assistance programs (DPAs) were gone for good. The DPAs were one of the last ways available for first time home buyers and others who were short a down payment but otherwise qualified, to buy a home with no money out of their own pocket. This program was a way to launder a seller's equity and use it as the basis of a grant from a charitable group like Ameridream or Nehemiah (here is a detailed look at how FHA DPAs work). But the DPAs were cut as one of the provisions of the new housing bill due to go into affect October 1^st. It now seems that rumors of their death may be greatly exaggerated. A compromise deal to save the DPAs appears to be about to be accepted, and the FHA Down Payment Assistance programs could be back in business before the end of this month.

The DPAs have long been controversial. FHA has linked the DPAs to a higher default rate, and they've been trying to shut them down for years. Ameridream and Nehemiah, the two biggest DPA Charitable organizations, contest the default figures, and claim that the defaults are more a function of fraudulent loans than problems with the down payment programs. It's been estimated that 30% of FHA loans have been combined with a DPA, so this has been a big factor in the market. After the housing bill was released, a group of Realtors, lenders, builders and community organizations led the fight to get the DPA reinstated. But it looked like this was a done deal. FHA claimed that the problems with the DPAs were severe enough that it could bankrupt the entire FHA system.

My experience has been different. FHA loans aren't and never have been Sub Prime loans. These loans are fully underwritten and the borrowers need to show that they have the income, job stability and credit responsibility necessary to handle their mortgage obligations. The down payment is one piece of the puzzle, but not the whole picture. I've worked with many borrowers who were otherwise great prospects to buy a home, but had not been able to save enough for the down payment and closing costs. FHA with a grant from Ameridream or Nehemiah was a way to get them into their first home. The problem as I see it wasn't the lack of a down payment on its own, but the layering of risk. In other words, a first time home buyer with a good credit history, a good income and some money in the bank was likely to make their mortgage payments on time, whether they contributed a down payment or not. On the other hand, a borrower with a low credit score, an inconsistent job history and high debt ratios was already on shaky ground, and the lack of a down payment just increased the risk of default.

With the new compromise it looks like FHA is coming around to this way of thinking. According to details released by House Financial Services Committee Chairman Barney Frank, a new bill will allow the DPAs to remain, but with limits and risk based pricing. Those home buyers with credit scores of 680 or above would be automatically eligible for the program, those with credit scores between 620 and 680 would be able to take advantage of the DPAs, but their mortgage insurance premium would be higher. This compromise makes a lot of sense to me. When the real estate market is soft, taking away one of the best programs available for first time home buyers didn't make much sense. This will take the riskiest loans off the table while still offering the program to more credit worthy borrowers. The new bill appears to have enough support to get through and is expected to be in place by the end of the month. I'll have more details as they come available.

Did You Miss the Boat on Your Illinois Mortgage Refinance? Maybe not

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Tue, 09 Sep 2008 09:24:21 -0500

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

Why would you consider refinancing?

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

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

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

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

Fannie Mae and Freddie Mac Bailout - How Will This Affect Mortgage Rates?

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sun, 07 Sep 2008 21:20:33 -0500

As expected, the US government stepped in today and placed Fannie Mae and Freddie Mac into a conservatorship under federal control. This is the long talked about bailout of the two mortgage giants. This action has been anticipated for a while as both the Fed and Treasury Secretary Paulson announced a month ago that they were ready to stand behind and guarantee any losses. Announcing the guarantees calmed the markets at first, but further losses have now forced the Government's hand. The new plan means that the Federal Government is not just standing behind Fannie and Freddie, but propping them up completely. They now have virtually unlimited access to capital. This plan will dilute common shares of stock in the companies to the point they are near worthless. Preferred shares (owned mostly by big banks) will still be viable, but a new treasury class of preferred stock (owned by the Treasury) will be issued. This new stock will have first dibs on any profits the company makes, and the stock holders won't see any dividends until all the money lent from the treasury has been paid back.

By doing this over the weekend (as they did with Bear Stearns several months ago) the intent is to avoid a panic in the markets. The initial response is positive. The Asian markets are rallying on the news as I write this. But the initial reaction is not always the lasting response. It is hard to know how this will play out in the short term, but in the long run this should bring mortgage rates down and be a boost for the real estate markets.

Over the last year the mortgage market has been nearly frozen. Investors in mortgage backed securities, lacking confidence in Fannie and Freddie being able to stand behind their losses, have avoided mortgage bonds and demanded a much higher premium for those they bought. The spread of mortgages over Treasury bills used to be about a 1% premium, over the last year it has grown to about 3%. All the big banks have huge portfolios of mortgages they haven't been able to sell. Fannie and Freddie have pulled back and are only taking on the most risk free loans. With the US Government behind it, this will give investors the confidence that if they buy a mortgage bond, they won't be left holding the bag if Fannie and Freddie go down.

The markets will be volatile this week, but when this all shakes out I expect that it will lead to a more normalized exchange and that the risk premium (the spread between mortgage bonds and treasury bonds) will begin to narrow. That means rates will come down.

This is an unprecedented move, and it puts all the risk of losses on the tax payer's shoulders. With a combined portfolio of about $5 trillion this is a huge risk, but the risk of doing nothing would be worse. The hope is that over the next 5 years as the real estate market improves, this could actually pay for itself. We will see how it all shakes out, but I think this is a good sign for the real estate market.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

Illinois Mortgage Rates - Mortgage Market Weekly Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Fri, 05 Sep 2008 23:25:05 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending September 5th, my take on the week's financial news and how it affected Illinois mortgage rates.

It's official. The biggest threat of inflation has passed and the weakening economy is our worst fear going forward (for this week anyways). Mortgage bonds are in full rally mode now, which means mortgage rates are moving down. Rates are at the best level in months, and this rally may have some more room to go. Over the last 3 months all the talk from the financial pundits (and many Fed Chairmen) has been about how inflation is set to ravage our economy. But now oil prices are down to $105 per barrel (from a high of $147 in July), and the economies in Europe and Asia are skidding to a halt. The dollar is showing signs of life and this all leads to money flowing out of stocks and into Treasury Bonds as a flight to quality, with mortgage backed securities going along for the ride.

The economic news this week showed more signs that the Fed won't be raising rates any time soon. The ISM index, a survey of national purchasing managers, came in at 49. Anything below 50 is a sign that the economy is down. The Fed Beige Book showed that most areas of the country are showing signs of economic weakness. Productivity was up slightly, but that just shows that producers are able to get more out put with less labor. The biggest report of the week was the unemployment report released this morning showing an increase in the unemployment rate from 5.7% to 6.1%, the highest it has been in the last five years. The report showed a loss of 84,000 jobs for the month (worse than the 70,000 loss that was expected) and the previous 2 months were also revised lower. Remember, with new population growth, it takes an increase of about 150,000 new jobs per month just to stay even. We now have less people employed than were at this time last year. Several Fed members also gave speeches, and the consensus was that we are going to be muddling through for a while, and inflation is, or will be under control.

A bigger story may be brewing this weekend. According to articles in the Wall Street Journal, Washington Post and New York Times (Hat trip to Calculated Risk), Fannie Mae and Freddie Mac are about to be put into a conservatorship under government control. This is the long talked about bailout of the two mortgage giants, and it would likely wipe out any equity stock investors still hold. It's not that this action is unexpected, both the Fed and the Treasury Secretary announced a month ago that they were ready to stand behind and guarantee any losses. But knowing a bomb is out there and hearing the explosion are different. If this takeover happens as they expect, it will be another interesting weekend, and it will have a big impact on the markets on Monday.

Mortgage bonds improved most of this week, but after the worse than expected employment numbers bonds actually ended the day worse than where they started. Still, it was a major rally for the week, and some profit taking by traders is expected. Technical indicators show that we may have some more room to run. One unknown is how low oil prices will go. Some analysts doubt that they will go below $100 per gallon. If they do OPEC could shut off the spigot and reduce supply to keep prices high. That may be harder to enforce than it has in the past, and with the economy slowing they may need to cut back a lot to keep the price propped up. What this all means is that if you are in the market to buy a new home, you may have better rates in your future, and if you've been thinking about refinancing but weren't able to get it done when the rates were lower, you may be about to get a second chance. Either way, if you need help, give me a call.

Here is what Illinois Home 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 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 6.125% 6.254% APR

15 year fixed rate 5.625% 5.789% APR

5-1 A.R.M. 5.46% 5.576% APR

7-1 A.R.M. 5.69% 5.735% APR

For Jumbo loans over $417,000

30 year fixed rate 6.75% 6.834% APR

7-1 A.R.M. 5.99% 6.103% APR

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 5.875% 6.463% APR

With no origination fee - 60 day lock

30 year fixed rate 6.00% 6.472% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

FHA Credit Letters - How Explaining What Happened Can Help You to Get Your Mortgage Approved

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Fri, 05 Sep 2008 13:44:14 -0500

Chicago, Illinois - One of the major differences between FHA loans and conventional loans is how the loans are approved. Conventional loans are almost entirely dependent on the automated approval, that is as long as you put the right information into the computer (Getting the information right is one of the jobs of a good mortgage broker or mortgage banker) and provide the matching documentation, the automated decision will stand. FHA is different. With FHA there are two ways to get your loan approved, through the automated decision, or with an FHA manual underwrite. FHA is also different in that any credit issues that show on your credit report (especially over the last 2 years) will need to be explained. If you already have an automated approval, this is more of a matter of dotting the I's and crossing the T's. If you can't get your FHA loan approved automatically, your credit letter may make the difference in whether or not your loan is approved.

First of all, if you've had serious credit problems you need to ask yourself if you really are ready to buy a home. This can be a hard question to answer, but if you have been struggling to pay your bills on time, buying a house is probably not the right decision for you. At the same time, I've seen many cases where the borrowers were good credit risks who for one reason or another had a situation that made it hard to pay their bills on time. This is especially true when the problems were caused by circumstances beyond their control, like a job loss or medical emergency. If you are looking to buy make sure you are back on your feet and your finances are under control. Another thing to look for is to see if the problems on your credit report are correct. If there are mistakes on your report and you can show that they are mistakes, you can get the report cleaned up before it is submitted to underwriting.

An FHA letter of explanation is used to explain exactly what happened and to give the underwriter a reason why she (or he) should approve the loan in spite of all the reasons she has to deny it. In other words, this is your opportunity to make your own case for why you are a good credit risk even though you show some credit problems and your scores may be low. Bad things happen to good people. There is a big difference between someone who runs into tough circumstances and has a hard time taking care of their obligations for a while, and someone who just doesn't bother to pay their bills or who takes on credit without figuring out how they will make the payments. The credit letter of explanation allows you to say in your own words why this was a temporary blip and that you are now ready to take on more credit.

So what are underwriters looking for in your FHA credit letter? In a nutshell, they are looking for 3 things.

The problems were a one time event, not a regular pattern. This is especially true if you can show that this happened due to circumstances beyond your control.
What did you do when faced with this difficulty? The key here is to explain what you did to get yourself back on track. Have you paid off the debts? Are you on a payment plan? You need to show that the credit problems have now been dealt with and are not a current concern.
Why won't this be a problem in the future? The underwriter is putting her credibility on the line when she approves a loan manually. You need to be able to show what has changed so the problems won't happen again. Has your income increased? Are your expenses lower now? What in your life has changed for the better that will give the underwriter confidence that she is not making a mistake in approving your loan?

There are a few things to keep in mind when writing your letter:

Authenticity, be yourself. This isn't an English paper and won't be graded on spelling or punctuation. Explain what happened just as if you were talking with the underwriter face to face. Don't try and shorten the explanation. Take as much time as you need to get the story right.

Document everything. If you have a good story to tell, you will also need to show proof to make your case.

So what happens if you don't fit these guidelines? Most situations fit under the automated approval, even situations which show some rough credit. So if you have some good compensating factors you may be in a better position than you think. But in many cases the best thing you can do is use this as motivation to get your credit back in order and be ready to buy a home down the road.

Here is a series of posts I wrote on how to clean up your credit and increase your credit scores:

How to understand and make the most of your credit score part 1

How to understand and make the most of your credit score - part2

How to understand and make the most of your credit scores -part 3

How to understand and make the most of your credit scores - part 4

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

FHA Risk Based Pricing Moratorium Means FHA Will Cost More for Most Borrowers

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Tue, 02 Sep 2008 08:23:30 -0500

For most Chicago area home buyers, the cost of FHA financing is about to go up. For years FHA had a one price fits all policy. As long as you qualified for an FHA mortgage you would get the same terms, whether you had a large down payment or small, and no matter what your credit score was, the mortgage insurance was the same price for all. This policy changed a few months back when FHA adopted a risk based pricing model. Risk based pricing is the idea that those borrowers who are the best credit risks will pay the least, and borrowers who have a riskier credit profile will still be able to get financing, but they will have to pay a higher rate for their mortgage insurance. This short-lived policy is about to change again. As part of the recently passed Housing Bill, starting October 1^st, there will be a one year moratorium on FHA risk based pricing.

The details of this change have now been released, and instead of going back to the old rate schedule, FHA is increasing their mortgage insurance rates across the board. FHA breaks their mortgage insurance premiums into 2 parts. One, the up-front premium which is financed into the mortgage, and two, a monthly premium which is paid for at least the first 5 years of the loan. Here is the new schedule that will be in effect as of October 1^st.

Up-Front MIP -

1.75% - Purchases and Qualifying Refinances
1.5% - Streamlined Refinances
3.0% - FHA Secure (High Risk Delinquent Borrowers)

Monthly MIP - these premiums are divided by 12 and paid each month

0.55% - over 90% LTV
0.50% - less than or equal to 90% LTV

On 15 year loans with LTV > 90%, annual mortgage insurance will be .25%

On 15 year loans with LTV < 90%, annual mortgage insurance will not be required

What this means is that borrowers with the lowest credit scores and the higher loan to values (less down payment) will be getting a break once this policy starts. But those lower risk borrower's who used to be conventional buyers, will pay a little more. Conventional loans are getting their own increases, so FHA still has an advantage, but the end result is financing is a little more expensive than it was before.

The new pricing goes into place on October 1^st. Some borrowers will save some money by financing (either through a purchase or a refinance) before then. We are a direct endorsement FHA banker, so we underwrite and fund the loans ourselves. If you need to close quick, we can do it.

Find the Maximum FHA Loan Amount in Your Area Here illinois FHA loans

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

Illinois Mortgage Rates - Mortgage Market Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Tue, 02 Sep 2008 08:19:03 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 29th, my take on the week's financial news and how it affected Illinois mortgage rates.

Because this is a holiday weekend, (and I've had some computer issues as well) this is a shortened version of the update. I'll have the breakdown and analysis in the next few days. A lot of information came out including some data showing that the economy was stronger and inflation was higher than expected. Normally this news would have killed mortgage bonds and sent mortgage rates soaring. It didn't this week because this was all seen as old info that doesn't reflect what is happening now. Rates improved every day except for Friday when mortgage bonds tanked (the Friday before a long weekend effect). For the week mortgage rates are slightly better than last week.

Here is what Illinois Home 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 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 6.25% 6.347% APR

15 year fixed rate 5.75% 5.958% APR

5-1 A.R.M. 5.694% 5.763% APR

7-1 A.R.M. 5.875% 5.989% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 6.634% APR

7-1 A.R.M. * 6.00% 6.173% APR

*there is a 1 year pre-payment penalty on this option.

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 6.125% 6.813% APR

With no origination fee - 60 day lock

30 year fixed rate 6.3750% 6.872% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

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.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

Illinois Mortgage Rates Weekly Market Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sun, 24 Aug 2008 19:56:47 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 22nd, my take on the week's financial news and how it affected Illinois mortgage rates.

This was another week in the mortgage bond market with huge volatility on a day to day basis, but an amazingly stable market when you squint your eyes and look just at the week end results. In other words, mortgage bonds went up and down like crazy , but mortgage interest rates ended the week just about where they started. This is the end of August doldrums, and there wasn't a lot of market changing news released this week. Still, there were a couple of events that make me think that the market focus is starting to change.

The PPI (Producer Price Index) a measure of inflation, jumped 1.2% in July, the largest increase in 27 years.

Inflation hawk and Dallas Fed Chairman Richard Fisher warned in a speech that though the economy was slowing, the up-tick in inflation could lead to a "lingering inflationary fever".

Over the last couple of months either of those items would have been enough to spark a huge sell-off in mortgage bonds. That didn't happen this time. There was plenty of news showing the economy is still slowing, but the inflation fear would have trumped the other news. Mortgage bonds actually broke through and ended the week above a stubborn level of resistance. Some of the inflation is obviously seen through the rear view mirror, but in the past it hasn't mattered. Bond traders have been wearing their inflation blinders and they would take any excuse to sell. The fact that the market took this news in without flinching makes me think we are likely to see better rates in the near future.

The big news this week (or really lack of news, but focus of rumors) was the condition of the big dogs in the mortgage arena, Fannie Mae and Freddie Mac. Their stocks sold off again this week as rumors of their impending demise continued. The Treasury has already announced that they will stand behind Fannie and Freddie, and a bail out has been worked into all the market equations. But knowing it is coming while not knowing when or how (or who wins and who loses) has kept the organizations in limbo. Fannie and Freddie are the biggest buyers of mortgage loans, so getting them out of limbo and in a position to buy will help stabilize the housing market. Letting it go on as it is now, with everyone knowing something is coming but waiting to see how it all pans out, makes for more fear and insecurity, which puts more pressure on Fannie and Freddie, keeping a negative loop going. I'm guessing that this will all come to a head soon, and the bailout will become official.

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 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 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% APR

5-1 A.R.M. 5.75% 5.867% APR

7-1 A.R.M. 5.875% 5.989% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 6.634% APR

7-1 A.R.M. * 6.00% 6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 6.25% 6.713% APR

With no origination fee - 60 day lock

30 year fixed rate 6.50% 6.852% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

You Want to Close When??? Closing Fast on Your Chicago Area Mortgage

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Fri, 22 Aug 2008 09:17:10 -0500

When I first started in the mortgage business here in the Chicago area almost 2 decades ago, it was normal for a home purchase to close in 60 days. That is a long time, but it took that long to close because that's how long it took to get a mortgage approved. The financing contingency date (the date in the contract that you need to have your mortgage approved by) was usually 45 days after the contract was accepted. Everything took longer back then from the appraisal to underwriting. If a file needed to close in 30 days that was a real rush, and we had to pull put all the stops to get it done. Like so much else, that way of doing business is long gone.

Now most contracts are written to close in 30 days or less. I've had two loans this month that closed in under two weeks (one where the buyers went on their honeymoon in-between), and have closed loans in days when necessary. Because of technology life is faster paced and people expect things to move faster. So one of the questions I get all the time is - How fast can you close? My answer is usually - How fast do you need to close? The truth is, in most cases we can close quickly. We underwrite and fund most of the loans ourselves, which means more control, and we now have FHA direct endorsement so we can close FHA files as fast as conventional ones. But there are still a lot of moving parts to getting a mortgage approved. In order to close a loan quickly everything has to be coordinated. The appraiser has to get the appraisal done quickly, the file has to be put together fast and accurately, and the documentation has to be collected up-front.

That's where the borrower has control. If you need to close on a mortgage in a hurry, here are some things you can do to help yourself:

Get pre-approved ahead of time - once you have a contract with a fast approaching closing date, it's too late to think of the things you should have done earlier. If you have a few problem spots on your credit, or other weak spots that need to be addressed, knowing what you need to do can put you in a much better position for a fast loan approval.
Have your documentation ready - The days of approving a loan based just on your credit score are gone. Having your documentation ready is a key to a fast approval. Having all the documentation at application means that we don't have to try and get the paperwork in other ways, which slows the process down. Here are some of the things we will need for a normal file:

Current paystubs for the last 30 days for all borrowers.

W2s for the prior two years (2006 and 2007) for all borrowers.

Full tax returns for the last 2 years - only if you are self employed or have substantial commission income.

Bank and investment account statements for the last 2 months (enough to show where the down payment and closing costs are coming from as well as any required reserves) - all pages attached.

A copy of your driver's license or other picture ID.

This is the minimum documentation. Depending upon your situation we may need more. To get a loan approved and closed quickly we will need to make sure we have what is required for the mortgage guidelines, and we need to address any questions that the underwriter may have. If you are looking for a fast closing, give me a call before you make an offer on a home and I can tell you what else you will need.

Have all your addresses and phone numbers - As part of the approval process we need to verify everything on your loan application. Addresses and phone numbers for both your current and past (if in the last 2 years) employers and if you are renting, your landlords.
Address any problems early - If you are buying with an FHA loan and you have had any late pays or credit problems in the last 2 years, we will need a letter explaining why it happened. If there are large deposits in any of your bank or asset accounts, we will need to know where the money came from and show a paper trail. Providing this information up-front saves time and helps speed the process.
Be prepared - The underwriter is the person who makes the final decision on the loan. If they issue an approval with conditions (things they need before the loan can close) be prepared to get the items needed as quickly as possible. Any thing that is listed as a pre-closing condition means the underwriter has to look at and sign off on these items before the property can go to closing.

You can close on a loan quickly, but you need to plan ahead. Working with your loan officer and having what you need takes away some of the stress and makes for a quicker, smoother closing.

Chicago Area Real Estate - Are We Turning the Corner Yet?

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Tue, 19 Aug 2008 19:23:41 -0500

The real estate market has had more than its share of bad news lately. Home prices are down, foreclosures are up and the outlook for the future is more of the same. From a big picture view the real estate market is miserable. But I'm seeing some signs here in the Chicago area that we may not have turned the corner, but we may be a lot closer than most people think. This isn't a scientific account of what is going on, it is simply an anecdotal look at what I'm seeing in the market right now. I'm not sure what exactly is causing this, maybe it's a result of the new housing bill, or maybe it's just the realization from home buyers that there are bargains to be had, but the real estate market here in the Chicago area is active. Here are some "trends" I have noticed:

Properties are selling - August is normally one of the slowest months for selling real estate here in the Chicago area. This is the month when people are taking their last minute vacations, getting their kids ready for the new school year, or just enjoying the end of the summer. Most years home buyers take the month of August off. It's no fun spending the day climbing in and out of a Realtor's car when the weather is so hot. But that's not the case this year. Buyers are writing contracts, and a lot of these contracts are coming together. I know because my phone is ringing and I'm busy putting together loan packages at a time when I expected to be able to put my feet up on the desk and take it a little slower.
Realtors and home sellers are pricing homes to sell - Any time that the market changes, it takes people a while to recognize it. This is especially true for the real estate market where the changes happen slower and are invisible for all but the most attentive consumers. The market a few years back was white hot. Most home owners didn't buy a home during that time, but they saw the high prices homes in their neighborhoods fetched, or maybe refinanced their mortgage with a value higher than they expected. It is those prices they have in mind when they go to sell. Or it has been until lately. Realtors are now pushing harder for realistic (lower) listing prices, and home owner's who want to sell rather than just have a sign in the yard for the next 6 months, are listening to them. So listing prices have come down by a lot.
Home buyers are getting realistic, too - There is no question that this is a buyer's market, but for too many potential home buyers that meant offering a ridiculously low price and then being surprised when no one bit. It is a buyer's market, and this means home buyers are getting good prices, and often seller concessions (money from the seller to pay for closing costs, for example), but this doesn't mean that home sellers are giving the house away. I've seen quite a few buyer's who wasted months trying to buy short sales or foreclosures where the lender never even responded, who ended up buying homes that fit their needs and were good deals, maybe even bargains, though not outright steals.
Home buyers and consumers are adjusting to the new lending rules - There is no question that it is harder to get a mortgage now than it was a year ago. The tighter financing rules have taken some potential home buyers out of the home buying pool. But financing is available, and there are options for many if not all potential buyers. This was a shock when lending guidelines first started to tighten, now it's the new normal.
Realtors are worried about appraisals - Over the last week I have had 3 conversations with Realtors who were concerned that the offer they were getting on their listing was too high and that they were worried that the property wouldn't appraise out. This is not the way Realtors normally think. Realtors want to get the highest possible price for their listings, and figure that the details will all work out on their own. To me this says two things: one, that the market is stronger now if offers are coming in high, and two, Realtors are now not only realistic about the market but have a healthy dose of fear, too.

These are again just observations, not hard data, but I think the truth is more complicated than the bleak headlines show. Real estate is different from market to market, and the headlines lump the stronger areas in with the areas with the biggest declines. The market here in the Chicago area is not booming, but it was never as hot as the bubble markets like California, Nevada and Florida, so it makes sense that it would never go down at the same rate.

What we are seeing is a balancing out of pent up buyer demand and sellers who are motivated to sell. The market over all is slow, but some homes are selling quickly. I'm told that about a third of the homes listed are sold quickly, many within the first month. These are the homes that show well and are priced right. Other homes are selling later, usually after price cuts to bring the listing price down closer to the current market. And some homes, because of both condition and price, are going to be on the market for a long time before they sell, if they do at all.

Over the next months we will see if this is a boomlet or a long term trend, but right now the market is active.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

Illinois Mortgage Rates Weekly Update

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Sun, 17 Aug 2008 21:07:48 -0500

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 15th, my take on the week's financial news and how it affected Illinois mortgage rates.

Over the last several weeks, mortgage rates have been going in a pattern, two steps forward - two steps back. Some weeks it is three steps forward and two steps back and other weeks it is exactly the reverse. In other words mortgage rates have been volatile with big daily moves either up or down, but over all they are in a tight pattern with mortgage rates hardly changing at all from week to week. We may be about to see a change as mortgage rates improve and break out of this dance. Then again, this could be a head fake to the outside before we return back to the range.

As has been the case over the last several months, there was a lot of contradictory information released this week. Early in the week the CPI (Consumer Price Index) came in with a red hot reading showing inflation at a 17 year high. The number was higher than expected, but it was expected to be high as a result of the high oil and commodity prices we've seen over the last months. This reading would have normally killed the mortgage bond market, but with oil prices coming down this was seen as a look in the rear view mirror and largely discounted. A couple of regional manufacturing indexes also came in with better than expected results. On the other side, the retail sales report looked weak, and even weaker when you factor inflation into that number. Unemployment numbers jumped to near 450,000, much worse than the 375,000 average we've seen over the first half of the year. The Michigan Consumer Confidence index also came in shaky at 61.7% just below the anticipated 62%, but the bigger news was that consumers are not as pessimistic about inflation in the future as they have been. Economists and market prognosticators are starting to think the same thing. Gary Stern, the Fed President of the Minneapolis region, announced in a speech that he expects higher unemployment and lower inflation as we go forward, another Fed member had the same sentiments earlier this week - a sharp change from what we've been hearing from other Fed governors recently, and another suggestion that the Fed won't be raising rates any time soon.

The market is now starting to think that inflation may not be the biggest problem our economy faces after all. Why the switch? A couple of reasons. First, oil prices are coming down steadily. The price of a barrel of oil was as low as $111 on Friday and closed at $113. This is a big drop from the high of $147 a few weeks back, and even more amazing that it happened at the same time as an invasion by Russia into Georgia, an oil producing nation. The dollar is also strengthening steadily. As the dollar increases compared to other currencies, this should mean higher exports and lower mortgage rates. Maybe a bigger factor is that the rest of the world is starting to slow down along with the US. It used to be that the United States led the way economically for the rest of the world. Many economists recently have signed on to the theory that this is no longer the case, that with the rise of China and the European Union as economic powerhouses the rest of the world has decoupled from the U.S. and will continue to grow as we dip. It turns out that that is not the case. The economic downturn we have been seeing is now spreading world wide. Another suggestion that rates should be going down.

Then again, even as the macro outlook points to lower mortgage rates, consumers aren't going to get the full benefit. Last week both Fannie Mae and Freddie Mac announced another round of extra fees and increased risk based pricing.

Mortgage rates improved this week and mortgage bonds moved above a level of technical resistance. There is another resistance level just above where mortgage bonds are now, but if bonds can move past that there is a lot of room for mortgage rates to drop. 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 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% APR

5-1 A.R.M. 5.75% 5.867% APR

7-1 A.R.M. 5.875% 5.989% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 6.634% APR

7-1 A.R.M.* 6.00% 6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS - 3% down payment

With 1 point origination fee - 60 day lock

30 year fixed rate 6.25% 6.713% APR

With no origination fee - 60 day lock

30 year fixed rate 6.625% 6.962% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.

Chicago Area First Time Home Buyers - $7,500 Credit When You Buy a Home - But You Have to Pay it Back

Peter Thompson - Chicago Mortgage Insight (Wintrust Mortgage) — Wed, 13 Aug 2008 08:25:58 -0500

One of the biggest provisions of the recently signed housing bill is a first time home buyer tax credit of up to $7,500. This credit is available for anyone who has not owned a home in the last three years and is designed to jump start the housing market and give first time home buyers a reason to get off the fence and in to the game. A lot of real estate companies have been pushing this credit as a no-brainer - free money from the government. I think there are some great benefits to this credit, but I have some mixed feelings on it - or at least the way it is being promoted. This is really an interest free loan, not a true credit, and it will need to be paid back over time. Still, an interest free loan is a heck of a good deal if you treat it as a loan. You just need to understand how it works and what it will mean for you not only now, but in your future planning.

First of all, you need to know how exactly the credit works.

It is available for first time home buyers only - this includes anyone who hasn't owned a home in the last 3 years.

The credit is for 10% of the purchase price for a maximum benefit of $7,500 - If you buy a home for $75,000 or above the credit is $7,500.

The credit is only available for homes purchased between April 9, 2008 and July 1, 2009 - this applies retroactively.

The credit is capped out based on income. Single taxpayers are eligible up to $75,000 income and married couples with incomes up to $150,000 will receive the full credit.

The credit needs to be paid back over the next 15 years at the rate of $500 per year (for the maximum credit).

Those are the basics, here are the details. You will still need a down payment when you buy. The credit doesn't kick in until after you file your taxes the next year. The tax credit is applied to your overall tax bill. So if you put together your tax return and you would normally owe $6,000, you will get a refund of $1,500 back. If you would normally receive a refund of $1,500, with the tax credit added back in you now would get $9,000 back. This money is yours to do what ever you want with it. But again, there is a catch. This isn't a real credit, it's an interest free loan.

Starting the following year you will need to pay back the credit over the next 15 years. If you received the full $7,500 this means you will have $500 more on your tax liability for the next 15 years until the loan is paid in full. A dollar today is worth more than a dollar next year, so this is still a great deal. Here is where I see the problem, though. Most first time home buyers don't stay in their first homes for 15 years. Five years is much more likely. So if you bought the home and sold it 5 years later you would have paid back $2,000 of the credit (you skip the first year). That means you still owe $5,500 to the IRS, though the loan will be forgiven if you sell without making a profit.

It makes sense to take the credit. Free money, even if you have to pay it back, is hard to pass up. But make sure you consider this when it's time to sell. If the credit means you will walk away with less cash to put down on your new home, that's a problem you need to address. If it means that you use your sale proceeds as a down payment and then have a major tax liability when you file your taxes the next year, that's a bigger problem. Even more so if you don't have other savings to pay the tax bill.

This credit is a great opportunity, but make sure you understand the implications.

Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit http://www.illinoismortgageratesandnews.com