Chicago Public School (CPS) teachers interested in getting $3000 or $7500 towards the purchase of a home should work with a lender that can offer the Chicago Public School (CPS) Teacher Homebuyer Assistance Program.

The program is for CPS teachers only. They must be first time home buyers (a first time buyer is someone who has not owned a home as their primary residence in the past 3 years).

Overview
1. Interest-free / no monthly payment loan that is forgiven at the end of the 5th year
2. $7,500 if property is in a new CHA mixed-income development
3. $3,000 if property anywhere else in the City of Chicago
4. Primary residence only

To Apply
1.  Complete a first time homebuyer class and receive certificate
2.  Find participating lender
3.  Complete Program Application Form and Information Release Form and submit to participating lender

If CPS teacher leave CPS teaching position or sells home within 5 years, a pro-rated portion of the money must be paid back

If you have any further questions about Chicago Public School (CPS) Teacher Homebuyer Assistance Program, Chicago Illinois FHA or Conventional loans, please contact Bryan Kelly, Sr. Mortgage Consultant @ 773-742-7940, and I would be happy to answer your questions and get it done.

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. Many borrowers like to shop for an interest rate amongst lenders when the are buying a home, and that is certainly never a bad idea to make sure you know what rates different banks, mortgage bankers, and mortgage brokers can offer you; however, there is another variable that is often overlooked that I want to point out – Rates can change at any point in time.

What that means is that if you are shopping for a rate, thinking it is always going to ensure you get the best deal, rates may move in the wrong direction (rates go higher) while you are shopping, waiting for one of your lenders to get back to you, or waiting until you and your significant other have a chance to discuss things.

If rates go higher, they go higher for practically everyone, so shopping to try to save an 1/8% in rate could cost you money if rate go 1/4% higher. You may get the best amongst lenders, but the unknown variable is which way rates will go. Unfortunately, there is no way to know for sure as everyone has their own opinion, and having a mortgage consultant predict which way rates may go for you, is asking them to play a guessing game with your money.

If you have any questions on rates on Chicago FHA loans, Illinois (IL) first time home buyer loans, or any other type of loans, I would be happy to answer your questions and quote you some options. I am a Sr. Mortgage Consultant that offers many programs from many of the major banks. You can reach me @ Bryan Kelly at 773-742-7940.

If you are considering getting your condo project FHA approved so you can get FHA loans into your condo building and would like to understand the process, here it is:

You have the option to get the project approved via HRAP or DELRAP

HRAP (HUD Review Approval Process) – Send your application directly to HUD.

DELRAP (Direct Endorsed Lender Review Approval Process) – Work with a local bank or mortgage banker that has DELRAP designation and is qualified to assist you and your association.

The process is actually a lot simpler and faster than most people expect, at least the DELRAP option. Here is how it would go:

1. Complete a “Condo Questionnaire” that a qualified bank will supply (28 questions asking about number of units, number owner occupied, any special assessments, etc…)

2. Provide a copy of the current year annual budget

3. Submit completed condo questionnaire and budget to qualified lender capable of offering DELRAP

4. In 24-48 hours, that lender can tell you if the condo meets the minimum requirements and let you know the costs to move forward (the costs range from $500 to $2000 depending on how large the project is and whether it is an existing or new project).

5. If the seller or association wants to move forward, provide the list of documentation required and payment, and once all documentation requested is received by the approved lender, you should be able to get the approval in about 2 weeks.

If you would like to get your Chicago or Illinois (IL) condo project FHA approved, I can help answer your questions and help get it done for you. I am a Sr. Mortgage Consultant that works for a bank that approves condo projects via DELRAP. Also, we do not require an Attorney Opinion Letter, which many of our competitors do. Please contact me at your convenience – Bryan Kelly at 773-742-7940.

If you are considering getting your condo project FHA approved, consider the following facts:

1. Before the market downturn in the last couple years, FHA loans accounted for about 2% of all mortgages. At that time, there were a lot of exotic mortgage options.

2. Today, it comes down mostly to Conforming and FHA loans, and today FHA loans account for 40% – 50% of all mortgages, depending on what article you read.

3. If 50% of buyers are going with FHA loans, having your condo building FHA approved will literally double your list of potential buyers. Many of these buyers don’t have any other options, as they can’t qualify for a Conforming loan. Conforming loans are more restrictive with regards to credit scores and down payment, and with little money down tend to result in a higher monthly payment

4. Doubling your list of potential buyers provides more applicants, which will shorten the sales cycle and help properties maintain their values.

5. Deciding against getting your property FHA approved will reduce the number of buyers by about 50%. Less prospects for your listing results in longer time on the market and more price drops.

If you have any questions about Chicago FHA loans, Illinois (IL) FHA loans, or getting your condo project FHA approved, please contact me @ 773-742-7940, and I would be happy to answer your questions and get it done.

If you are an Illinois (IL) first time home buyer looking to buy, please keep in mind that the government first time homebuyer tax credit is set to expire very soon. Buyers must be under contract by the last day of April, 2010; however, the close date must occur by the last day of June, 2010.

What are you missing out on if you don’t hit these deadlines?

An Illinois first time buyer that qualifies could be missing out on up to $8,000.
A move up buyer (someone who currently owns) that qualifies could be missing out on up to $6500.

Is the $8000 a reduction in taxable income?

No the tax credit is not a reduction in taxable income, but a flat out credit, meaning if you were going to get $1,000 back on your tax returns and qualify for the $8,000 credit, you would get $9,000 back. If you owned $2,000 on your tax returns and qualified for the $8,000 credit, those numbers would net out and you would get $6,000 back.

Frequently Asked Questions (FAQ):

If you have any questions about this tax credit, please contact me, or you can visit the following site: http://www.federalhousingtaxcredit.com/

If you have any mortgage questions, please contact me anytime @ 773-742-7940. I am a mortgage professional with 10 years experience and would like to have the opportunity to help and ensure you a stress free mortgage process with no surprises.

Best of luck in your search and new home!

Coming up with 20% percent down payment and borrowing 80% of the properties value can be very difficult for many Illinois first time buyers. Fortunately, lenders are willing to loan up to 95% of a properties value on a Conforming loan (FHA loans up to 96.5%), but there is a catch. If borrowing greater than 80% of the properties value on one mortgage, borrowers will incur PMI.

What is PMI:

PMI is an insurance policy that protects banks against losses when a borrower defaults on a loan. The purpose of PMI is to protect the lender (not you), but it does allow you to become a homeowner with just 5% down payment.

How Can I Avoid PMI:

1. Put 20% down

2. Cap your first mortgage at 80% of the properties value so you don’t incur PMI and get a second mortgage for the rest of the money you need. These are called “Piggyback loans” or “Combination Loans” (Example: if you have 10% to put down, you would get an 80% first mortgage and a 10% second mortgage; If you had 15% to put down, you would get an 80% first mortgage and a 5% second mortgage, etc…). In the past, 80-20 and 80-15 combination loans were popular, but in today’s mortgage market an 80-10 seems to be the highest the second mortgage lenders are willing to go.

What Are The Options To Pay PMI:

Many buyers are not familiar with some of the options on how to pay PMI, and many borrowers won’t even have options presented to them, as the service levels and knowledge of different loan officers can vary. PMI may be paid multiple different ways, such as:

1. Monthly – Pay fee monthly with the mortgage payment

2. Single Premium – Pay a one time fee at closing and not have a monthly payment

3. Split Premium – This is a combination of #1 and #2 above (this option has a lower monthly fee and lower single premium fee than the costs in #1 and #2 above)

What is the cost of PMI?

The cost of PMI is a function of loan amount and down payment. Below is a chart showing the costs of monthly PMI with different down payments, assuming credit scores above 700:

To calculate your monthly PMI fees, take the fee listed above for monthly PMI in the row that corresponds with your down payment and multiply by the loan amount. That will give you the annual cost of PMI. Divide by 12 to get the monthly cost.

Example:

$100,000 loan with 5% down payment
PMI factor with 5% down is 0.94% or 0.0094
Multiply $100,000 * 0.0094 = $940 annual PMI
Divide by 12 months to get $78.33 / month

Below is a chart showing the costs of Single Premium PMI with different down payments, assuming credit scores above 700:

Down Payment Fee for Single Premium PMI

 To calculate single premium PMI, take the fee listed above for single premium PMI in the row that corresponds with your down payment and multiply by the loan amount. This will give you the one time cost of PMI.

Example:

$100,000 loan with 5% down payment
PMI factor with 5% down is 2.40%
Multiply $100,000 * 2.4% = $2400 one time fee due at closing

Cancelling or Terminating monthly PMI

Monthly PMI cancels automatically once you pay the loan balance down to 78% of the original purchase price. You may contact your lender to inquire if they will cancel it when you’ve paid your loan balance down to 80% of the original purchase price. In the past, if your home appreciated, you used to be able to use a new appraisal to assist with getting to the equity mark required. You can contact your lender to see if this is still an option.

Tax Deductibility:

PMI is tax deductible if your income is less than $100,000. The tax deductibility decreases evenly as your income hits $110,000, in which case it is not tax deductible.

Questions:

If you have any mortgage questions or would like to see a head to head comparison of monthly PMI vs Single Premium PMI vs Split Premium PMI, please contact me anytime. I am a Sr. Mortgage Consultant with 10 years experience, and I specialize in Chicago FHA loans and Illinois (IL) first time buyer programs.

If you are an Illinois (IL) first time home buyer, you may be wondering which loan program is better for you – FHA or Conventional. There is no one answer for everyone, as each borrower has different credit scores, down payment funds, monthly budgets, etc… Below are some of the major differences between FHA and Conforming loans that will help you gain a better understanding.

Down Payment Requirements

Conforming loans require a minimum of 5% down payment. If less then 20% is put down, then a minimum of 5% down must be from primary borrowers own funds. If putting down 20% or more, then all down payment can be a gift from an acceptable source (example: parents, brothers, sisters, etc…)

FHA loans require 3.5% down, and the funds can be from any combination of the primary borrowers own funds, a gift from an acceptable source (example: parents, brothers, sisters, etc…), or a down payment assistance program (Yes, down payment assistance programs still exist, although the most popular ones are gone).

Loan Level Price Adjustments (LLPA)

Conforming loans charge extra fees or higher rates (take your pick) when a borrowers’ middle credit scores go below 740. Not too many borrowers are affected at the 740 mark, but most borrowers will actually start to feel this effect when middle credit scores go below 720. These fees are called Loan Level Price Adjustments, and you can see an update on these fees on Fannie Mae’s website https://www.efanniemae.com/sf/refmaterials/llpa/pdf/llpamatrix.pdf, page 2, Table 2. Also, Conforming loans have another LLPA for loans on condos when a borrower is borrowing greater than 75% of the properties value on a Conventional loan. That’s a one time fee due at the closing table of 0.75% times the loan amount (example: $750 fee per $100,000 borrowed). If the borrower does not want to pay this fee, the borrower can take a slightly higher interest rate instead (estimated 1/4% increase to interest rate).

FHA loans are much more lenient on credit. they charge extra fees when a borrowers’ middle credit score goes below 660, and the fee is so nominal that most banks will just cover that cost and not even pass it on to the borrower. Also, FHA does not have any extra fees related to loans on condos.

Mortgage Insurance

Mortgage insurance is an insurance policy that protects the banks against losses in the event that a borrower defaults.

Conforming loans require Private Mortgage Insurance (PMI) when a borrower borrows more than 80% of the properties value (example: the borrower is putting down less than 20%). If the borrower is putting down 20% or more, then PMI is not required. The PMI companies have their own guidelines, such as minimum credit scores, maximum allowable monthly debt to income ratios, etc… On a conforming loan, not only do we have to make sure we meet Fannie Mae / Freddie Mac and the banks guidelines, but if the borrower incurs PMI, we need to make sure the borrower meets the PMI companies’ guidelines. A borrower can choose to pay the PMI different ways (example: monthly fees or one time lump sum fee at closing). Monthly PMI premiums will be canceled when the loan to value gets down to 78%.

FHA loans require mortgage insurance regardless of down payment on any FHA loans with greater than a 15 year term (example: 30 year term). FHA mortgage insurance is of the “split premium” variety, meaning a borrower pays a one time lump sum fee at closing called an “Up Front Mortgage Insurance Premium (UFMIP)” and then a monthly fee. The UFMIP is 1.75% and increasing to 2.25% for loans submitted after 04/05/2010. The UFMIP can be rolled into the loan amount so it is not necessarily an out of pocket expense for a borrower, and thus, no more money is needed into the transaction to cover this fee. Monthly mortgage insurance premiums will be canceled when the loan to value gets down to 78%, provided the borrower has paid monthly premium for at least 5 years.

Maximum Loan Limits

# of Units          Conforming          FHA___
       1                    $417,000         $410,000
       2                    $533,850         $524,850
       3                    $645,300         $634,450
       4                    $801,950         $788,450

Condo Requirements

Conventional loans will require a condo questionnaire to be filled out. There are different questionnaires required depending on whether a borrower is buying into a new project or an established project, as well as how much down payment is being put down. The questionnaires will ask questions related to the project and association, such as questions about budget, reserves, any litigation, how much commercial space, how many units are owned as primary residences, etc…

FHA loans require the condo project to be FHA approved. There are no longer any exceptions to getting an FHA loan into a non-FHA approved condo project (ex: FHA “Spot” loans are no longer available). For a list of approved FHA Chicago projects or FHA Illinois projects, please reference the following website: https://entp.hud.gov/idapp/html/condlook.cfm and make sure you search by both HRAP/DELRAP (new lender delegated approval process) and pre-HRAP/DELRAP (old HUD approval process), as well as by zip code and condo association name. Sometimes a typo may have your desired property not come up in your search, when it may actually be there. If the condo project you wish to buy into does not show up on the FHA website as being approved, I can help you get it approved if it qualifies and the association is willing to allow it. There is a fee for this ($500 – $2000 range depending on size of project), and the seller or association can pay it.

FHA vs Conforming loans – Which Is Best For You?

Now that you understand the basic differences between FHA and Conventional mortgages, to decide which is best for you, speak with a mortgage consultant to discuss your specific situation and have them show you current rates, down payments, and monthly housing payments.

FHA loans require less money down and are much more lenient on credit scores than Conventional loans. With less than perfect credit or with less than 10% down, FHA loans tend to be a very attractive option. With great credit and greater than 10% down, Conventional loans tend to be a very attractive.

If you have any mortgage questions or would like to see a head to head comparison of Conforming vs FHA loan rates, PMI options, and total housing payments, please contact me anytime. I am a Sr. Mortgage Consultant with 10 years experience and would like to have the opportunity to help and ensure you a stress free mortgage process with no surprises.

Best of luck in your search and new home!

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