Maggie Finegan Team Blog

Find a property that qualifies for FHA and $8,000 in ready cash.

Buyers purchasing homes, condos or apartment buildings that qualify for FHA loans may soon be eligible for bridge loans or cash advances.  The advances are for up to $8,000 that buyers can use for down payment, closing costs or other expenses, pending receipt of their tax credit check from the IRS.

The change in federal policy announced on May 12 by the Housing and Urban Development Secretary, Shaun Donovan, will turn into immediately spendable cash - a tax credit that often isn’t received until months after closing.

The advance will allow many more potential buyers to be able to afford to purchase.  Under FHA guidance, all lenders doing business with the FHA will be authorized to provide bridge loans at closing.

Anyone who hasn’t owned a principal residence during the past three years is eligible for the tax credit.  The credit amounts to the lesser of 10 percent of the purchase price or $8,000.  It covers purchases closed by November 30.

Mortgage companies and banks are gearing up now for this opportunity.

Are you too busy to shop but want an easy way to receive season fresh produce?  Sign up to receive a weekly box of produce, picked fresh and waiting for you at the Andersonville Farmers Market.

Simply buy shares in the Community Supported Agriculture, CSA. Typically the share consists of a box of vegetables, but other farm products may be included. Interested consumers purchase a share (aka a “membership” or a “subscription”) and in return receive a box (bag, basket) of seasonal produce each week throughout the farming season.

The growers already confirmed as providers of produce are Scotch Hill Farm CSA, Triple A Farm’s Weekly Vegetable Box, Videnovich Farms CSA/Vegetable Subscription. The benefits to you are:

• Eat ultra-fresh food, with all the flavor and vitamin benefits
• Get exposed to new vegetables and new ways of cooking
• Usually get to visit the farm at least once a season
• Find that kids typically favor food from “their” farm – even veggies they’ve never been known to eat
• Develop a relationship with the farmer who grows their food and learn more about how food is grown

For more information about CSAs, visit here.

Why would a luxury home buyer search for a house in the Lakewood-Balmoral neighborhood, part of Edgewater in Chicago?  Better yet, what will the home look like and what amenities can a buyer expect?

Lakewood-Balmoral has the distinction of being recognized by the Chicago Landmark commission for its architecturally significant homes.

Architecturally, some of the best homes showcase English Gothic, Colonial, Classic Colonial, Flemish, Queen Anne and French Renaissance of the Transition period.  Residents have taken on the restoration of their homes, bringing these gems back to the luster they had in the 1920s and 1930s.  Old fashioned lamp posts light the quaint streets.

Lakewood-Balmoral is within walking distance of the lake, a 20 minute train ride from Chicago’s Loop and 5 minutes from Andersonville restaurants, shops and entertainment.  Visit here for information on local amenities.

Luxury homes buyers in the area are mostly professionals or business owners.  Many work downtown and/or from their home office several days a week.  Buyers can expect to pay upwards of $1,000,000 for a nicely appointed four bedroom, three bath home.

Luxury homes are defined by the quality of the finishes and the extent of the amenities.  Kitchens have high end appliances such as a Bosch dishwasher, Dacor dual fuel stove, Subzero refrigerator.  Custom built cabinetry such as England built Smallbone, or Italian designed Scavolini are often used.  There is usually a bar area off the living or dining area equipped with ULine wine cooler, or quite often the homes have wine cellars stocked with extensive collections. Many homes have fully functioning offices and are wired throughout for technology.

The master suite will includes a luxe bath featuring separate steam shower or body spray fixtures, along with a Jacuzzi.  Laundry areas are usually on the second floor for convenience. Green building and smart homes technology is beginning to appear in features such as on demand hot water systems, cellular roof panels, and the use of opening glass walls.  For more on these resources, click here.

Yards usually have decks equipped with stainless steel outdoor kitchen and low voltage lighting.  Although the Lakewood-Balmoral neighborhood is within walking distance of local transportation, the highest end homes have 3-car heated garages to house that sports car in addition to the family van and commuter car.  And of course security systems are an essential.

In response to all the inquiries I have received over the pending Fannie Mae Streamline Refinance program, here is a general update.

Fannie Mae has set guidelines that at this point seem to differ significantly from what the actual investors are considering moving forward.  These investors are the major banks and secondary market purchasers of everyone’s mortgage debt.  They are the end of the line when it comes to what makes prudent financial sense in the real world.  (Those with the gold make the rules.)  Regardless of what our politicians want, bankers like myself will have to abide by the rules set by these gold-holding investors, and so do you.  I can tell you that they will probably have an answer for us before the end of April, as they have indicated they will begin purchasing these loans in May. 

1. The major issue is loan-to-value.  Fannie Mae would like to see 105% financing, the investors want to stay below 95%.

2. Only Fannie Mae compatible loans, where the borrowers are absolutely current on their payments will be considered a bona fide candidate for this program.

3. Mortgage Insurance on your current loan is likely to continue as-is, regardless of your home’s current value.  If you do not have mortgage insurance now, chances are you will not need it on the refinance.

4. No cash-out or limited cash-out will likely be the standard.

5. Credit reports will be pulled and the minimum score requirement has not been set.

6. Some investors will limit the number of properties OWNED to a maximum of 4.

7. If you have a second mortgage, you will not be allowed to create a new second loan, or the loan officer will be required to have the current second loan resubordinated, maintaining a first position with the new loan (this could be problematic for the bank holding your second note).

8. The Rate/Risk factor has not been finalized.

© 2009 Michael S. Amers

On March 18^th, The Federal Reserve announced their intentions to buy an additional $750 billion of Mortgage Backed Securities (MBS) as part of an ongoing plan that began late last year.  In the first 24 hours following the announcement, the Fannie Mae and Freddie Mac 30 year fixed rates dropped a quarter point to historic levels.  Concurrent to that announcement, the Fed will also purchase $300 billion in Treasury Bills, Notes, and Bonds to promote lower lending rates for credit lines, installment loans, and the like.  Besides lower rates in other instruments, buying Treasuries has the effect of maintaining the attractiveness of the MBS market yields which compete directly with Treasuries as an investment.  The MBS market is enormous compared to the Treasury market.

Recently, several major banks have declared profits after many months of dismal reports.  Not surprising.  You may recall I recently mentioned the banks were inundated with refinances to capacity after a major rate drop in December, thus they acted in their own self interest and raised rates to curb demand for mortgages.  The major banks fired tens of thousands of employees last year.  Without the support staff available to get these loans through the pipeline, the banks found themselves swamped with business they could not handle.  Premiums on every loan went up as end investors in these loans demanded greater profit on every origination.  Hiring staff to meet demand is expensive and time consuming.  Working to production capacity at increased margin is highly profitable.  Therefore, some banks are reporting they are making money again.

These unprecedented moves by the Fed should have a tsunami effect on interest rates, but as history has shown, greed will prevail and the net effect will be slightly lower rates at maximum return for the big time players with money to lend.  After all, those with the gold make the rules.  But gold is not how the Fed pays for MBSs.  The U.S. Treasury prints new money, an inflationary move.  As the supply of money increases, so does the rate of inflation.  Rates this low cannot last forever and commodities such as crude oil and gold have soared with the expectation of inflation.

Home purchases in the next few months will be the key factor whether or not rates will continue to drop to new record levels.  The dramatic drop in rates over the last several months did not send everybody to the closing table.  New loan originations were mostly customers refinancing out of ARMs and higher rate mortgages.  This alone kept rates from sliding lower.  When the demand for homes begins to rise again, it will certainly put the banks in a position to raise rates and the trend will reverse itself.  Simple supply and demand dictates this.  Waiting to buy a home strictly on the cost of money (interest) is not a wise strategy.

This Federal Reserve motion to buy down rates is reason to refinance if you have not already done so this year.  Any rate below 7% is a low, low rate anytime in history.   The Fed is purchasing MBSs with coupons mostly above 5.5% which means they expect to recoup their money as the masses get out of notes with rates higher than 5.5%.  Yes, they want to push rates slightly lower but they also want the U.S. Treasury’s money back as soon as possible!  They want you to reduce your mortgage payment, or get the moving van ready to go!  It’s high time to get motivated.

© 2009 Michael S. Amers

In an effort to curb the tide of mortgage defaults, Fannie Mae and Freddie Mac have toughened their standards and increased the fees lenders pay to sell mortgages to the secondary market by these industry giants.

Last year, the U.S. Government took guardianship of Fannie and Freddie to ensure continued liquidity in the secondary mortgage market, an important part of doing business in the housing industry.  Since that time, certain risks have been factored into the final rate a borrower received based on loan characteristics. These are known to the industry as pricing adjustments, and have effectively negated the downward trend of mortgage rates for some borrowers.  Although these adjustments were to take effect on loans purchased by these government sponsored enterprises on April 1, 2009, the major banks made a sweeping decision to implement them almost immediately.

Loans prone to default have certain risk characteristics. The default rates are highest for borrowers with lower credit scores, lower equity into a property, 30 to 40 year amortizations and/or interest-only, cash-out refinances (pulling equity), the existence of subordinate financing, multi-unit properties, and condominiums.

Some of the hikes in rate pricing are: 75 basis points for condo units with less than 25% equity stake; 25 basis points for interest-only payments; 25 to 300 basis points for credit scores coupled to loan-to-values; 25 to 300 basis points for cash-out refinancing; and 100 basis points for 2-unit properties.  For example, a condo with 25% down payment might enjoy a 5.25% rate, but the same borrower putting down 24% would get 6.00%.  And that’s not figuring in other adjustments, such as to the credit score which requires the use of a tiered matrix to determine if an additional hike is warranted.

All the stimuli the legislators can muster cannot control the markets, as the markets always find balance and account for the real risks encountered by investors of mortgages.  Hindsight now tells us we should have been rewarding the prime customers all along instead of providing easy money to so many that did little to deserve the best rates.  Today’s market makers would not need to employ such draconian methods into a free market system reeling from misguidance.

Risk based adjustments are nothing new and have been used to determine the final interest rate for mortgages, credit cards, and auto loans.  Many auto insurers use them to determine premiums.  Keep in mind that rates are still historically low, even with these pricing adjustments.  Thinking about getting a home loan soon?  This is no reason to put off a refinance if the rate available to you now is much lower that the one you already have.  Interest paid on a primary residence is an income tax write-off, whereas on a business property it is an expense deducted against rental income.  Regardless of the interest rate, real estate purchased to fulfill the need for shelter or some other worthwhile use always makes sense.  Leverage a property sensibly and enjoy the rewards for years to come.

© 2009 Michael S. Amers

The refinance boom has been keeping the mortgage industry busy.  When the Federal Reserve started buying Mortgage Backed Securities in December, the Fannie Mae and Freddie Mac 30 year fixed rates dropped to historic levels.  When the banking community was inundated with refinance files to capacity, they acted in their own self interest and raised rates.  Why is that?

The Mortgage Backed Security (MBS) market is the driving force behind the 30 year fixed rate market and not the U.S. 10 year Note as many assume (use that as a talking point at your next cocktail party/bible meeting/group therapy).  When the demand for any bond increases, its price rises and conversely its yield (rate) drops.  By buying these MBSs, the government forced the going 30 year mortgage rates to drop, as they did in December and January.

The Federal Reserve Bank through the U.S.Treasury intended for this to stabilize the housing market by promoting cheap money for home buyers and to help current mortgage holders an opportunity to refinance from higher rate loans.  But the primary investors in these mortgages, the major banks, fired tens of thousands of employees last year.  Without the support staff available to get these loans through the pipeline, the banks found themselves swamped with business they could not handle.  What is the easiest way to curb demand for mortgages?  Raise the rates.  They may tell you that recent economic data warrants their actions, but I don’t fully buy it.

The banks and other investors need to make a premium on every loan they underwrite to make up for the awful turn in events these last few years.  That’s fine considering the risk they undertake.  It is their money, and those with the gold make the rules.  But was it not the intention of our elected officials to help the people?  Once again, the stimulus package seems to have helped the banks over the needs of the people.

This is no reason to put off a refinance (or home purchase) if the rate available to you now is much lower that the one you already have.  Waiting for the bottom could be a costly proposition as you continue to pay the higher rate while waiting to shave a quarter point which might save you a few dollars.  Rates are at historic lows.  If you can qualify for a mortgage, take advantage of this situation.  Refinance!  Buy a house!  Carpe diem!

© 2009 Michael S. Amers

So here we are again, looking at the glass half-full and thinking about what a year 2008 has been in terms of reversal of fortunes and a breakdown of the economy due to restricted credit.  Sure home prices have dropped to levels not seen since in years but some markets have held up fairly well, and now opportunity knocks as some markets have prices too good to pass and the 30 year fixed rate mortgage averages in the mid 5 percent range, near record lows.

Americans are forced to think before they spend and how they spend.  The consumer credit spigot has been shut and that may have been a mixed blessing for America.  We have given ourselves away for low prices at the shopping districts, but at what cost?  Manufacturing jobs were lost for service jobs, but even those have gone abroad.  Even that phone call to the service center ends up in India.

America has its greatest strength in its ingenuity.  Our universities are filled with applicants outside our borders.  The great technological advances have stemmed from our country. Not India, China, Viet Nam, Mexico, or Timbuktu.  Remember that.

Not everybody needs another widget, but they need shelter.  A home that is owned is a great basic investment in one’s self.  A home will build equity.  In this calendar year, renters lost money by giving it to the landlord.  New homeowners may have merely taken a deferred loss in equity until the day they sell.  That will be a day of reckoning.

Take advantage of lower prices and lower mortgage rates if you have not already done so.  This is the golden opportunity all first time homebuyers have been waiting for.  Get pre-approved for a conservative loan and get together with a reputable Realtor.  Hire a real estate attorney to finalize the transaction.  Make it happen while the masses are still reeling from the past year.

Make no mistake.  We have the ingenuity, we have the capital, we have the tillable land, we have military might, and we have the work ethic to get it done.  We will persevere.

© 2009 Michael S. Amers

According to the Chicago Tribune on sale prices in Chicago’s Lincoln Square neighborhood increased from an average of $293,000 in 2007 to $352,000 in 2008.  Interestingly, however, the number of units sold declined from 245 units to 174 units.  It appears that the price increase is due to more single family homes and higher end condominiums being sold in 2008 as compared to 2007.

Lincoln Square is one of only 4 north side Chicago community areas where prices are stable or increasing.  The other areas include Lincoln Park, Edgewater, Montclare, Avondale and Near North Side.

Presently there are 73 two bedroom two bath condos for sale, with four under contract/pending a sale, and 48 have sold and closed in the last six months.

The real estate market has absorbed 52 of a 125 condos for sale in Lincoln Square in the last six months, or 42% of the inventory.  The rate of absorption is nine condos per month.  At that rate, there is a seven month inventory of condos for sale.

The average price for a two bedroom two bath condo is $338,000.  Properties in Lincoln Square are selling for 99% of list price at time of contract.  Days on market average 132 days.

For more information about Lincoln Square, and other Chicago neighborhoods on click here.

Keller Williams Fox Realty in Lincoln Square is moving to a new location at the corner of Lincoln and Montrose.

It was a difficult decision, as the present location at Wilson and Western has been a real estate office since 1974, when it was Fox Realty, and then in 1998 Fox joined the Keller Williams franchise.

David Camp, team leader, and the 100 agents in the office, are looking forward to the move. Lincoln Avenue has great visibility and recognition, and the location on the border of the thriving North Center neighborhood is a strong one.

Located across from from Wells Park and Julius Meinl, and just steps from the Sulzer Regional Library, there is ample parking and it is walking distance from the Brown line Montrose stop.