Archive for the 'Mortgage Info' Category
Incentives To Buy Homes Now Keep Coming
August 23rd, 2010 categories: Chicago Info/News, Economic Recovery, For Buyers, Mortgage Info
It’s easy to get down on today’s residential housing market. Home values are down. Foreclosures are up. Sales are sluggish.
But all of these factors, which make selling a condominium or single-family home today so challenging, make this a great time to buy a home in Chicago.
The Illinois Association of REALTORS® reported that the median sales price of Chicago homes stood at $230,000 in the second quarter of this year. That’s an extremely affordable price for Chicago. And by taking out an FHA loan, buyers here only have to come up with a down payment of 3.5 percent of a home’s purchase price.
At the same time, inventory levels are high. Buyers have a lot from which to choose when it comes to buying condominiums or single-family homes in some of the city’s top neighborhoods, like Lincoln Park, Ravenswood, Lakeview, Lincoln Square and Streeterville.
Then there’s the news regarding mortgage interest rates. According to the latest numbers from Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage loan stood at an amazing 4.42 percent for the week ended Aug. 19. The rate for the average 15-year fixed-rate loan hit 3.90 percent. Both rates were down from the previous week, and down from the same period one year earlier. This means that buyers today can get more home for their dollars.
Even the high number of foreclosures in Chicago and the rest of the country can mean good news for buyers. When banks and other lending institutions have to re-sell their foreclosures, they usually do so at a greatly reduced price. Again, this gives buyers the opportunity to purchase homes for fewer dollars. Some buyers might purchase a foreclosure to be able to get into a neighborhood that they otherwise could not have afforded.
No one’s arguing that this is a difficult time in which to sell a home. But for first-time buyers and any others who don’t have to first sell a residence, this is a great time to buy.
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Do Record-Low Mortgage Rates Matter Today?
July 7th, 2010 categories: Chicago Info/News, Economic Recovery, Housing Market, Mortgage Info
Let’s talk about the good news first: The average interest rate on a 30-year fixed-rate mortgage fell to 4.58 percent for the week ended July 1. Freddie Mac says that this is the lowest since the mortgage financing company started tracking mortgage interest rates in 1971.
Amy Hoak, a columnist for MarketWatch, lays out the bad news in a recent column: Fewer U.S. consumers seem to care.
Hoak was reporting from the Kitchen & Bath Industry Show in Chicago. This is a fun show, one that showcases the latest trends in kitchen sinks, whirlpool tubs and cabinetry. It’s a place to go to dream of that ideal kitchen or bathroom. It’s hard to imagine, though, that too many of the vendors working the show were having fun this year. As the housing industry has struggled, so have the remodeling and do-it-yourself businesses.
As Hoak writes in her column, consumers aren’t comfortable spending large sums of money today, even if mortgage interest rates are at record lows. They’re worried about losing their jobs. And why not? The national unemployment rate remains stuck near 10 percent. That’s too high to allow people to feel comfortable financially.
At the same time, a large number of homeowners can’t even take advantage of the low rates to refinance their existing mortgage loans. That’s because their home values have dropped since they purchased their condominiums or single-family homes. They may no longer have the 20 percent equity that most traditional lenders require homeowners to have before approving them for a refinance.
Don’t get me wrong: It is good news for home buyers that interest rates are at such low levels. First-time buyers who don’t already own a home are especially fortunate: They can buy more home, even in Chicago neighborhoods such as Lincoln Park, Lincoln Square and Lakeview, while spending less money on a mortgage loan each month.
But until the other fundamentals of the economy improve – lower unemployment, higher housing values – don’t expect a rush of buyers to take advantage of these low interest rates.
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Don’t Focus Too Much On Interest Rates
April 19th, 2010 categories: Mortgage Info, Real Estate News
Here’s why it doesn’t pay for homebuyers to obsess over mortgage interest rates: It’s impossible to predict whether they’re going to rise or fall. Interest rates that seem high one week might very well plunge to far lower levels the next.
And people who tell you that they know what interest rates are going to do next week, next month or next year? They’re either deluded or lying.
Here’s an example: Last week, mortgage interest rates fell again, falling, actually, to where they stood about two weeks ago. This followed two weeks of worrying from buyers, sellers and economists that interest rates were going to keep rising.
Turns out, everyone was wrong. This isn’t unusual. It’s simply impossible to predict with any degree of accuracy where interest rates are headed from week to week.
According to a story in the Wall Street Journal, the average interest rate on a 30-year fixed-rate mortgage fell to 5.07 percent for the week that ended April 15. That’s down from 5.21 percent one week earlier. A year ago, though, 30-year fixed-rate mortgages came with an average interest rate of 4.82 percent.
Interest rates near 5 percent are actually quite favorable ones. There were times, remember, when homebuyers considered interest rates in the 7-percent range to be terrific. That time? It was about four years ago.
When clients ask me when they should buy, I have a simple answer: Whenever they’re ready. I advise them to not worry over interest rates. The rates are out of buyers’ control. They’ll always rise and fall. Buyers who try to time their home-buying decisions to take advantage of the lowest interest rates are invariably disappointed: After all, there’s no guarantee that interest rates won’t fall again after these buyers close on a mortgage loan.
If you’re hoping to buy a condominium or single-family home in Chicago, this is a great time to buy, regardless of what the interest rates are doing. Home prices here are still low. You can find great buys in the city’s top neighborhoods, places like Lincoln Park, Lincoln Square, Roscoe Village, Ravenswood and Lakeview.
So stop obsessing over interest rates. Instead, study your local market. You might find that there are plenty of great buys out there. Their sellers are just waiting for offers.
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The Cost of Waiting
April 7th, 2010 categories: Economic Recovery, FSBO's, For Buyers, For Homeowners, For Sellers, Housing Market, Mortgage Info, Taxes
This article was written by and provided courtesy of Michael Wallace, a Mortgage Banker from Chicago Bancorp.
First-time home buyers and move-up buyers must be under contract by April 30th in order to receive their respective $8000 and $6500 tax credits. A lot of people are taking advantage of this and it has stirred up a lot of activity, particularly in the first-time buyer category. Prices have dropped over the last few years, rates are at historic lows and the government wants to give buyers a big check. It’s a perfect scenario for buyers right? But there are still some people out there sitting on the fence and wondering if buying in the current economy and real estate market is a good idea. I’ve crunched the numbers on what I consider to be 6 likely scenarios.
The Cost of Waiting
Let’s look a pretty typical first-time buyer scenario. $250,000 condo purchase using the popular 3.5% down payment FHA 30 year fixed mortgage at 5.125%. The monthly mortgage payment would be $1314 per month, the down payment would be $8750 and Uncle Sam would be sending a check for $8000. Let’s also assume that the buyer remains in the home for 5 years.
What if #1 - 1 year from now real estate prices remain the same and mortgage rates remain the same
Cost of waiting = $8,000…no check from Uncle Sam.
What if #2 - 1 year from now real estate prices remain the same but mortgage rates are 1% higher
Cost of waiting = $17,120. The mortgage payment would be $1466 per month. Over 5 years this is an additional $9120 in payments and the $8000 check is missing.
What if #3 - 1 year from now real estate prices are 5% lower and mortgage rates are the same
Cost of waiting = $3603. The mortgage payment would be $1248. Over 5 years this saves $3960 in payments. The down payment is $438 less. But the missing $8000 still makes the cost of waiting an expensive decision.
What if #4 - 1 year from now real estate prices are 5% lower and mortgage rates are 1% higher
Cost of waiting = $12,302. Even with a smaller loan amount, the increase in rate would increase the monthly mortgage to $1393. Over 5 years this adds up to $4740 more in payments. The down payment would be reduced, but only by $438. Add in the loss of the $8000 and again the cost of waiting is not good.
What if #5 - 1 year from now real estate prices are 5% higher and mortgage rates are the same
Cost of waiting = $12,338. The loan amount would be larger resulting in a monthly payment of $1379. Over 5 years this adds to $3900 more in payments. The down payment is $438 higher and the $8000 is not in the picture.
What if #6 – 1 year from now real estate prices are 5% higher and mortgage rates are 1% higher
Cost of waiting = $21,938. The higher loan amount and higher interest rate result in a monthly payment of $1539. Over 5 years this adds up to $13,500 more in payments. Add the missing $8000 and the $438 more in down payment and this becomes quite costly.
Written by Michael Wallace 03/27/2010
Contact Michael Wallace
(312)738-6051
michaelw@chicagobancorp.com
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Home Equity Numbers Not As Sobering As Thought
February 16th, 2010 categories: Chicago Info/News, Economic Recovery, For Homeowners, Housing Market, Mortgage Info
Late last year, data company First American CoreLogic released a report saying that one in every four homeowners were underwater on their mortgage loans in the third quarter of 2009. These homeowners owed more on their mortgage loans than what their homes were worth.
It was a sobering statistic, especially considering how important home equity is to the wealth of most U.S. homeowners. You’d think from news like this that the total value of U.S. homeowners’ home equity would have plummeted during the recession and housing slump.
Surprisingly, though, you’d be wrong.
Syndicated real estate columnist Ken Harney recently reported on the fact that the net equity of U.S. homeowners actually grew from the first quarter of 2009 through the third quarter of that same year. It grew, in fact, by nearly $1 trillion during this period. Harney also reports that it grew by $418 billion from June 30 of 2009 through Sept. 30 of the same year.
These numbers pale in comparison to the way home equity grew during the boom years of the housing industry. But Harney points out that the most recent data suggest something positive: Prior to this report, the net equity of U.S. homeowners fell for three straight years. Perhaps the rising numbers, even if they aren’t rising as quickly as some would like, are more proof that the worst of the U.S. housing slump is over.
As far as I’m concerned, the numbers are positive. And these aren’t the only positive ones I’ve seen lately suggesting that the housing market, both locally and nationally, is finally on a rebound. Home sales continued to rise during the second half of 2009, both in Chicago and across the United States. At the same time, Crain’s Chicago Business recently wrote that even downtown Chicago condo sales rose in the fourth quarter of 2009, and that market had suffered greatly during the housing slump.
I’m not suggesting that the country’s housing market has recovered fully. But I do believe that numbers such as those showing that home equity has risen are a good sign that not only has the recovery begun, but that it’s picking up steam.
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