March 2, 2011 – If you’ve been trying to purchase a Chicago condo but are having a hard time securing an FHA-backed mortgage, you might be trying to buy a unit in what some lenders are refering to as “blackballed” buildings. Other terms being used more often are “mortgage jail” and “zombie buildings”. According to a recent article in the Tribune, both Fannie Mae’s and Freddie Mac’s new requirements regarding condo buildings are causing lenders to back away from issuing loans for units in many Chicago real estate developments.

According to the article, there were 61 buildings in the Chicago area and around Illinois that had applied for FHA approval but were turned down for various reasons. The new rules have a lot of different parameters, including whether the building is new or already existed before the rule changes. Both Fannie and Freddie require that a minimum of 70% of the condos in a new building be used as the buyer’s primary or secondary home, not rented. For existing buildings, the minimum of owner occupany is 51%. And becuase there is no more FHA spot approval for single condos in a building, the whole building has to be approved and then re-approved every two years.

The article points out some other warning signs that buyers who are seeking low interest loans need to look out for as potential problems. Those include any lawsuits against the building, condo associations that don’t have enough money in reserves for unexpected repairs and condo buildings that have buyers who are behind in paying their monthly assessments.

So even if you’ve got a great credit score, you may want to check the credibility of the building you’re thinking about buying into, because it may not be high enough. Of all the Chicago foreclosures filed in 2010 in the Chicago area, 42.5% were for Chicago condos. So do all of your homework to keep from being one of those statistics.

[tags]Chicago Foreclosures, Chicago Lofts, Chicago Real Estate[/tags]

December 3, 2009 – If you’ve been shopping for Chicago condos that are FHA approved, you may want to pay attention to the changes in their mortgage requirements that could be coming soon. These possible upcoming changes are in response to the rapidly increasing amount of FHA loans that have potentially stretched the administration a little thin and an effort to minimize the risk of buyers defaulting on loans.

According to an article in the Tribune, Shaun Donovan who is the Housing and Urban Development Secretary said, “We have made the decision to exercise our authority to increase the up-front cash that a borrower has to bring to the table in an FHA-backed loan to make sure that FHA borrowers have more “skin in the game” and a stronger equity position in their loans.”

The nitty gritty of the impending FHA mortgage requirement changes will be made public in January. Besides the increase in down payment, which is currently 3.5%, a higher credit score is also expected to be mandatory.

Other upcoming changes to FHA mortgages may include a rate hike in the annual mortgage insurance premium and that sellers will only be able to offer buyers help with 3% of the closing costs instead of the current 6% limit.

With FHA insuring nearly 30% of home loans and 20% of mortgage refinances, these changes could have a big impact on Chicago real estate sales. Over 75% of all first time home buyers now opt for FHA backed mortgages, so it probably won’t take long to see what sort of effect this has on sales of Chicago New Construction Condos.

[tags]FHA Mortgage Requirements, Chicago Condos, Chicago Real Estate[/tags]

October 6, 2009 – We’ve told you about a couple of Chicago real estate developments where MB Financial is offering deals on financing, including CA23 and SoNo. Another development where MB is trying to generate sales is at Silver Tower on 303 West Ohio Street in River North.

You can lock in a 4.375% fixed interest rate on a 30 year mortgage with just a 5% down payment and don’t have to have mortgage insurance on the loan. This offer from MB Financial is only good until October 15th.

The 40 story Silver Tower has a selection of one to three bedroom Chicago condos for sale with prices starting in the $240,000s. Dens are optional. The units have a balcony or terrace, floor-to-ceiling windows, oak floors, wall-to-wall carpeting in the bedrooms, cherry or maple wood cabinets and stainless steel Kitchen Aid appliances. The kitchens also have a double stainless steel sink and granite counter tops. Baths come with marble flooring and vanity tops plus glass shower surround and separate soaker tub.

The Sky Lobby has a 24 hour fitness center and landscaped patio with garden. There is also a 24 hour doorman at Silver Tower, bike room, storage lockers and the tower is pet-friendly.

With the deadline to lock in MB’s loan rates just over a week away, you may need to act quickly if you’re interested. And remember that there are other Chicago Condos in River North that may interest you as well.

[tags]Silver Tower, Chicago Condos, Chicago Real Estate[/tags]

May 21, 2008 Renaissance Lofts, a Kopley Group Chicago loft development at 1791 Howard Street, is featuring a two year, no questions asked, money back guarantee to buyers.

Finally… A Developer Who Puts His Money Where His Mouth is…

We spoke with Nick Copley last week. He’s determined to prove that Renaissance Lofts is the best Chicago loft that money can buy, so he’s offering what appears to be Chicago’s only unconditional money back guarantee on a Condo development.

“If in two years you don’t still love your loft. The Kopley Group will buy it back from you with no questions asked.”

We’re wondering… will other Chicago Condo developers will step up to the plate and offer hesitant buyers this kind of guarantee?
We’ll update you soon about the effect on sales…

[tags]Rogers Park, Chicago Lofts, Chicago Real Estate[/tags]

April 12, 2008 – Belgravia Group seems to have scored another sales winner with 600 North Lake Shore Drive. The developer recently confirmed that the 41 story north tower is basically sold out, and just about a dozen units are all that are left of the building’s 154 Chicago condos. Those remaining units that are not under contract are a combination of floor plans, with the bulk being one bedroom condos and a couple of two and three bedroom units. The price for these condos begins in the low to mid $400,000 range.

The south tower, which is slightly taller at 47 stories, is about 70 percent under contract right now. The most popular units there seem to have been the two and three bedroom condos, of which certain floor plans are already sold out according to the sales agents. The two towers combined in this Chicago real estate development have 400 units total, and construction should be complete in the first quarter of 2009.

600 North Lake Shore Drive billed itself as one of the last addresses on the lake. Its prime location next to Ohio Street Beach, a Starbucks, dry cleaners, Subway, Flamingo Bar and Grill as well as Navy Pier had to certainly make these condos more attractive to buyers. The interior finishes are top notch, too, with GE Profile stainless steel appliances, Kohler Mariposa soaking tub in the master bath, Wood-Mode cabinetry, building roof top sun deck and sculpture garden, fitness center and 24 hour doorman.

Belgravia Group has earned a well-deserved reputation for developing some of the best Chicago Luxury Condos, and both their sales figures and buildings show it.

[tags]600 North Lake Shore Drive, Chicago Condos, Chicago Real Estate[/tags]

Freddie Mac’s weekly survey showed rates for the benchmark 30-year loan near its yearly low as of Thursday, December 13th.

Nationally, the 30-year fixed-rate loan averaged 6.12% for the week, up from 6.11% in the week prior. The mortgage’s low point was Jan. 19, when it hit 6.1%. At this time last year the loan averaged 6.3%.

15-year loans, popular with homeowners looking to refinance, rose from 5.84% to 5.86% . At this time last year the 15-year averaged 5.85%.

The 1-year Treasury-indexed adjustable rate went up from 5.43% to 5.45% (compared with 5.15% a year ago), while the 5-year hybrid ARM held steady at 5.92% (compared with 5.77% a year ago).

Reports of increased job growth and November retail sales that exceeded expectations were offset by weaker wage growth and lower consumer confidence in December. According to Freddie Mac chief economist Frank Nothaft, these mixed economic reports prevented any drastic changes in mortgage rates this week.

The Mortgage Bankers Association said Wednesday that applications for mortgages, particularly applications for refinancing, have increased in recent weeks due to mortgage rates’ stabilizing at comparatively low levels.

With rates remaining around their lowest levels for 2006, many borrowers who relied on exotic mortgages like subprime ARMS to purchase high-priced homes are now seeking safety in a fixed-rate loan, said Richard Powers, general manager of the online-mortgage lender Ditech.com.

However, borrowers are increasingly failing to keep up with their mortgage payments. According to the MBA, mortgage delinquencies spiked upward during the third quarter for all types of loans, but especially for subprime ARMs.

[tags]Chicago Mortgages, Interest Rates, Chicago ARMs[/tags]

[dels]Chicago Mortgages, Interest Rates, Chicago ARMs[/dels]

Applications for mortgages–both for new homes and refinancing–at big U.S. banks dipped 3.9% last week compared with the previous week. The applications were down 1.6% year-over-year.

ARMS made up only 24.5% of last week’s applications, their smallest percentage in three years. The average interest rate for ARMs slipped from 5.88% to 5.87%.

Applications for loans to buy a home rose 1.3% over the last week, but are down roughly 14.6% from last year. Applications for loans to refinance existing loans sank 9.6% in the past week, but are up about 18% from the previous year.

[tags]real estate, real estate market, mortgages, home loans, ARMs, refinance, refinancing[/tags]

I read recently that this year there’s 4 million homes on the market in the United States. According to historical data, that’s a million more than there was this time last year. That’s an increase of 33%.

“Until now sellers didn’t want to cut their prices. They were much more willing to provide an incentive – refinish the deck, seal the driveway, help with the financing, anything but cut the price,” says Mark Zandi, chief economist of Moody’s Economy.com. Incentives are nice, but let’s face it: the last thing sellers want to do is slash the price of the property. They make out better by offering buyers incentives like these, and also, many homeowners are very hesitant to accept the fact that they’re home isn’t worth as much as they originally thought. But now they’re finally waking up to the truth – that smart buyers are waiting for an irresistable deal – and that cutting the price of the property is the best way to get someone to buy a house, a condo, or anything, for that matter.

Even the mortgage companies are catching on. Chances are if you buy a new home, your mortgage lender will offer you some incentives (but be careful – because of the complexity of the mortgage process, these incentives tend to be less transparent).

Brokers are making out well, too. Because of the glut of homes, real estate brokers are being catered to by the home building industry, which means that your broker may be eyeing some incentives if he unloads a house on you – and he’s not required by law to tell you that. Be clear with your broker; ask him/her up front if they’re receiving any incentives for selling the property. If you ask, they’re obligated to tell you. Otherwise, your broker might be less than straight with you in this market.

[tags]Chicago real estate, buyer’s market, Chicago condos, Chicago brokers[/tags]

Tired of seeing charts like this one?  You may see something like the reverse soon (imagine the graphic upside down).  Although the Fed stopped raising interest rates last quarter, home sales continue to slow, but for how long?  History teaches that it may not be too long before home sales begin to rise again – as long as the rest of the economy takes a little turn as well.

The consumer confidence index, or how people who spend money in this country feel about the economy, “brightened” more than expected in September, causing realtor’s hearts to skip a beat.  This may be an overstatement, given that consumer confidence is only loosely related to the housing market (and condo sales!).  Most likely the confidence index was up because of declining gas prices and the leveling off of interest rate increases.  But will Joe Consumer shovel out the dough for a new condo in Chicago because he believes the economy to be somewhat “better”?  We’ll have to see.  Check for an update next month.

Negative amortization: A method in which the borrower pays back less than the full amount of interest owed to the lender each month. This shorted amount is then added to the lump sum owed to the lender. This allows flexibility in packback of the home loan.

—
If you’ve opted for an ARM (adjustable rate mortgage) in the past few years, chances are your initial, “teaser” interest rate was pretty low, probably somewhere around the 2% mark (over the last 2 years, homeowners have taken out over 1.2 million ARMs below this rate). But the “teaser” likely only lasts for a couple of blissful months at the most. After that, the rate of the mortgage adjusts to the current market: a 6% rate. Or a 9% rate. That’s a giant jump. Some could even end up with a loan balance that is larger than when they started:

“…because the initial teaser rate is a “payment rate,” not an interest rate. That means the market-rate interest on the loan starts to accrue from the get-go and monthly payments aren’t enough to cover it, let alone pay down any of your principal. (money.cnn.com)”

This means payments that start out at $1,000 may suddenly balloon to $3,000. If the homeowner can’t make up the balance each month, then it’s added to the overall balance of the loan. You can see how this could be a problem for many people, even those who attempted to refinance their loans with a low-rate ARM.
According to the data, 23% of those 1.2 million ARMs have negative equity now – which means the value of the home is less than the amount owned in loan paybacks.

It’s very important to consider this phenomenon when applying for an ARM, even if you’re refinancing. Those without negative equity can opt to switch their ARM for a fixed-rate mortgage in hopes of getting a lower monthly payment.

[tags]Chicago real estate, Chicago mortgage[/tags]