I will use this blog to share tidbits of real estate
information for the Chicago area. Hopefully, someone will
find my real estate ramblings useful at one time or another.
Unless you’ve been under a rock, I’m sure you’re aware that the
housing market is going through a tough time. The theme for most
media channels is ‘doom and gloom’. And while I must admit that
the current market isn’t great, we have to keep in mind that
that Real Estate is a very local business. Comparing the
Chicago market to the California market is definitely an
‘apples to oranges’ comparison.
Also, Chicago is so big, that it isn’t really fair to compare
neighborhoods either. Some neighborhoods still have a very strong
demand for housing (i.e. Loop,Near North), whereas other areas have
less of a demand. In comparison to other areas of the country,
Chicago is doing better in the midst of this “real estate slump???.
However, I must admit that the number of transactions are
probably down 25% vs. 2007. But, homes are still being bought and
sold every day in Chicago. If you’re planning on buying a home, that
you will live in for the next 3 to 5 years, then you don’t have anything to worry about.
Some buyers may be on the sidelines waiting to see if the prices
will drop. It is next to impossible to realize when you’re at the
bottom of any economic cycle. They don’t even know when we’re
in a recession, until two quarters later! Hindsight is 20/20.
Also, what about mortgage rates?! Due to this crazy inflation,
mark my words, mortgage rates will start climbing. So while you’re
waiting to see if we’re at the bottom of the Real Estate cycle,
the mortgage rates will climb, and you’ll miss your window of
opportunity. It is an excellent time to buy right now!
Unfortunately, we are still in a credit crunch. The lenders have
much tighter guidelines, and it is much harder to obtain financing.
Conventional programs want a high credit score, a good down payment,
and a good (verifiable) income. Most people have 2 out of 3 (and if
you’re one of my friends, you probably have 1 
. So now is a good
time to pull your credit (www.myfico.com), and try to improve it.
You definitely want to pay off any collections. Also, the quickest
way to make your score jump is to pay down credit card balances!
If your credit is on the low side, don’t despair. You may still be
able to get a loan via the FHA program.
The FHA program is making a strong comeback in popularity.
The best part about FHA is that it isn’t driven by credit score.
If you have a 580 FICO middle score, and a decent verifiable income,
you should be able to obtain financing. However, you will need a 3%
down payment.
The days of “no money down??? loans are history (with the exception of
the VA guaranteed loans). But, the 3% FHA down payment can be a gift
from a family member, government program, or certain non-profit
organizations. FHA also allows the seller to pay your closing costs.
Congress is about to pass legislation barring the seller from funneling
the 3% down payment to a buyer via a third-party organization though.
Apparently, these types of deals have a much higher rate of foreclosure.
The biggest down side to the FHA programs, is that they generally
don’t approve condos. You will have a much easier time financing a
single-family home. Townhomes, and ‘2 to 4′ unit buildings should
be OK too. FHA also has a stricter appraisal process, and the seller
may be required to make certain repairs before closing. This may not
be feasible if you’re dealing with a REO (bank owned property).
FHA insured loans are the savior for this rough lending market.
FHA loans also allow a slightly higher Debt-To-Income Ratio. More on
Debt-To-Income Ratios later….
Until the next time,
Mark Killion
Real Estate Broker
Century 21 Affiliated
5200 S. Harper Ave
Chicago, IL 60615
24 Hour Voice Mail: 312-242-1822
Send me a note!
Visit me online: www.773property.com
EQUAL HOUSING OPPORTUNITY
