According to financial Web site Bankrate.com (RYAN: http://www.bankrate.com/financing/mortgages/fha-fees-on-the-rise-again/), starting April 1 borrowers will pay more for upfront mortgage insurance provided by the FHA. This follows a rate increase that came in April of last year. As Bankrate reports, FHA loan fees are now at their highest point in the government agency’s history.

Premiums for FHA insurance will rise from 1 percent to 1.75 percent of the base mortgage loan that borrowers are taking out. The FHA says that the increase will add about $5 a month to the mortgage fees that borrowers pay.

That average $5 increase might not seem like a lot. But buying a home is not an easy financial task for many purchasers today. They won’t appreciate any fee increase.

That being said, FHA-backed loans are still terrific options for today’s home buyers. Of course, the FHA does not originate loans. Instead, the government administration insures them. This doesn’t change the fact, though, that FHA loans offer several benefits to homebuyers.

The most important? For most borrowers, FHA-insured loans require down payments of just 3.5% of a home’s final purchase price. This is a key benefit. Conventional mortgage loans often require buyers to put up at least 10 percent of a home’s purchase price as a down payment.

Consider a single-family home or condominium in the Chicago area that costs $200,000. A 10% down payment would require buyers to come up with $20,000. If these same buyers had good enough credit to qualify for a 3.5% down payment with an FHA loan, they’d only have to come up with $7,000. That’s a big difference.

FHA-backed loans are also available to homebuyers with lower credit scores. Borrowers with FICO credit scores of at least 580 will qualify for the 3.5% down payment requirement. Those with credit scores of 500 to 579 will be able to take out an FHA loan with a down payment requirement of 10 percent.

Those borrowers with credit scores under 500 will not qualify for FHA financing.

Even with the fee increase, then, an FHA loan is still a good chance for many Chicago homebuyers.

According to a recent story in the Wall Street Journal, interest rates in the United States on 30-year fixed-rate mortgage loans averaged 3.99 percent for the week that ended on Dec. 8. That’s down just a bit from the 4 percent average interest rate of one week earlier and down significantly from the rate of 4.61 percent a year earlier.

Interest rates on 15-year fixed-rate mortgage loans were even more impressive, according to data from Freddie Mac. This rate stood at 3.27 percent for the week that came to a close on Dec. 8. That’s down from 3.3 percent from a week earlier and 3.96 percent from a year ago.

The 15-year fixed-rate mortgage interest rate is also just a tick above its all-time low of 3.27 percent, which it hit in October.

This is, of course, great news for consumers interested in purchasing a Chicago condominium or single-family home. Low interest rates mean that it is less expensive for buyers to borrow money. Buyers today, then, can save hundreds of dollars a month on their mortgage loan payments compared to the days when interest rates of 6 percent or 7 percent were considered solid.

On the downside, the process of applying for a mortgage loan isn’t easy today. Buyers will need to send their mortgage lenders paperwork proving that they make enough money each month to afford their new mortgage payments. They’ll also have to produce documents showing lenders how much they pay each month in debt.

Borrowers will also have to submit to a credit check. Lenders today reserve their lowest mortgage interest rates for those borrowers who have FICO credit scores of 740 or higher.

But for those buyers willing to submit their paperwork, and who have strong credit scores, buying a single-family home or condo today is more affordable than it’s been in a long time.

According to the Medill report, which cited figures from the Mortgage Bankers Association, during the week ended Nov. 4 mortgage refinance applications rose by 12.1 percent from the previous week.

These numbers were recorded at a time in which the interest rate for a 30-year fixed-rate mortgage stood at 4 percent and the rate for a 15-year fixed-rate mortgage loan stood at 3.31 percent, according to Freddie Mac.

Homeowners can save a significant amount of money by refinancing. For instance, homeowners with a 30-year fixed-rate mortgage loan of $165,000 with an interest rate of 5.25 percent would pay $911.14 every month. Those homeowners with the same loan but an interest rate of 4 percent would pay $787.74 a month. Those savings add up over the course of a mortgage loan.

However, homeowners should remember that mortgage refinancing is not free. The Federal Reserve Board estimates that homeowners usually pay from 3 percent to 6 percent of their outstanding principal balance in refinance fees. That’s why it’s important for homeowners to work closely with mortgage loan officers to determine if the savings they’ll receive every month by refinancing will allow them to quickly cover the costs of the refinance.

Also, homeowners should realize that a refinance will take some work on their part. They’ll have to meet certain credit requirements to qualify for the best interest rates. They’ll also have to provide plenty of paperwork to their lenders to close the refinance. This often includes tax returns, paycheck stubs, bank checking and savings accounts, credit card bills and other documents.

But those homeowners who do qualify for the lowest interest rates can generate plenty of savings by refinancing. And because interest rates remain so low, this is the perfect time for them to take action.

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.

PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.

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.

PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.

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.

PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.

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

PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.

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.

PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.

Now comes the news that Grossman, like so many other Chicagoans, has had to sell his city condominium at a loss. And not just any loss: According to the Chicago Sun-Times, Grossman sold his condo in River North’s Trump International Hotel & Tower for a whopping $700,000 loss.

The Sun-Times reported that Grossman sold his condo for $2 million last week. The paper also reports that he purchased it for $2.68 million in September of 2008. Grossman originally put the unit up for sale at $2.89 million before reducing his asking price to $2.3 million and eventually selling for $2 million.

Grossman’s tale is a good lesson for the owners of Chicago condominiums: Although the market has picked up considerably since 1/1/2010, unless one has lots of equity or absolutely has to sell, now might not be the best time to put your unit on the market. According to a story in the Chicago Tribune, condo prices in Chicago are now at early 2004 levels.

The Tribune cites data from Standard & Poor’s/Case-Shiller that shows that prices fell 8.5 percent for Chicago condominiums in the 12 months that ended in October.

Many condo owners have no choice but to sell now. Their employers may be transferring them to a new city. Maybe they’ve found a better job on their own in a new location. Or maybe they’re going off to graduate school across the country. Whatever the reason, these folks can’t wait out the market.

Their best bet is to do everything they can to set their condo units apart from their competition. These owners should work closely with their REALTORS® to set up a marketing plan. This may include steps as simple as giving their condo’s interiors a fresh coat of paint or something as advanced as hiring a professional stager to show off their unit in its best possible light.

In today’s Chicago condominium market, sellers need every advantage they can get.

PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.

Most mortgage lenders or banks require homeowners to have at least 20 percent equity in their homes to qualify for a refinance. But the city of Chicago’s median sales price dropped to $215,000 in November of last year, according to the Illinois Association of REALTORS®. That’s down 3.4 percent compared to the $222,500 median price in November of 2008.

Those homeowners who purchased city condos or single-family homes in 2005 or in the first half of 2006 have more than likely seen their residences’ values fall even more significantly. These buyers were purchasing while the real estate boom was raging, meaning that they were more likely to pay far more for their condos or single-family homes.

What can homeowners do if the value of their Ravenswood two-flat or Lakeview condo has fallen so much that they don’t have any equity in their residences? What if they are underwater on their mortgages, owing more on their homes than what they are worth? This is hardly an unusual situation today. The latest data from First American CoreLogic shows that one in every four homeowners across the nation is underwater.

These homeowners’ best bet might be to contact their mortgage lender or bank and ask if they are offering refinances as part of the federal government’s Home Affordable Modification Program. Under this program, designed to provide some financial relief to struggling homeowners, mortgage lenders can refinance the mortgage loans of homeowners who owe on their first mortgage loans as much as 125 percent of their home’s value. This means that the owners of a $200,000 home could owe as much as $250,000 on their first mortgage and still qualify for a refinance.

Of course, you’ll have to meet certain requirements to qualify for a Home Affordable Modification Program loan. Your home’s loan must be owned or guaranteed by Freddie Mac or Fannie Mae, and you must be current on your mortgage payments.

The vast majority of mortgage lenders are participating in the federal program. But even if your lender isn’t, you should still call. Lenders can opt to refinance your loan at their own discretion, even if you are underwater.

PLEASE CLICK HERE TO VIEW PROPERTIES NOT YET ON THE MARKET.