Living in Lincoln Park Blog

There are several indications that the new stimulus bill passed by Congress will have a positive influence on the struggling housing market. If you are considering buying a home in Chicago for the first time, the stimulus plan may help make that happen.

How the Stimulus Bill Stimulates the Bottom Line

The biggest effect the stimulus plan will have on new home buyers is a tax incentive. We all want to get more money back on our tax returns and the stimulus bill has an $8,000 tax credit for first-time home buyers purchasing a home in Chicago.

How You Qualify

In order to qualify for the stimulus tax incentive you must:

• Not have owned a home in the past three years.
• Use the new home as your primary residence.
• Have gross income of less than $75,000 per person or $150,000 per couple.
• Report the purchase on your income tax filings.  Should you sell your home within the first 3 years of owning, you will need to re-pay all or a portion of the stimulus money. After 3 years, all of the stimulus money is yours! It’s my understanding that if you owe money to the IRS, that amount is deducted from the $8,000 incentive and you would be refunded the difference! Not a bad incentive!!

Stimulating Interest on Lincoln Park Home Purchases

The stimulus bill also gives first-time home buyers a chance to get into those big ticket houses. Houses with market values over $417,000 will be eligible for lower interest rates to make them more affordable. The luxury home industry has stagnated in the failing real estate market and this should give it a vital boost.

President Obama’s stimulus plan is serious about improving the housing market and has a lot to offer the first time buyer. The bill gives people looking to buy a home in Lincoln Park reason to hope. What are you waiting for…all of the ingredients are here, waiting for you to take advantage of them!

Finally, someone has deciphered the 1st time home buyer tax credit! I’ve been wanting to share this information for some time, but it seemed to be a moving target. We’ve heard that the $8,000 was a credit, or a deduction on your taxes to a loan to be paid off over 15 years. According to the article, “it looks like it’s a credit, which is typically more valuable than a deduction, since it eliminates your taxes on a dollar-for-dollar basis — and in this case, you may get it even if you don’t owe any taxes.”

So, if you’re looking to jump into the Chicago real estate market, now is an excellent time to do so…rates are still low, prices are great and if you meet the income criteria you can take advantage of the $8,000 credit.

We’ve all read the articles about how bad the national real estate market is. And we have had conversations about Chicago real estate and this being a great time to buy. While I see both sides, I lean towards the “great time to buy side.” And though there are some great deals to be had, the wild card now seems to be the lenders. In the past, buyers were able to tell the lenders what they were willing to put down - 5%, 10%, even 0% + throw in the closing costs and go for a 103% loan! Or to make it even more interesting, “let’s do an interest only loan.”

Oh how the times have changed! Now the loan criteria seems to be a moving target. As I have been telling my buyers looking for Chicago real estate over the past few months, we are no longer in a market where you can say “here’s the loan I want,” or “here’s what I’m willing to put as a down payment.” The ability to get a loan is now pretty much dictated by the lender…they will tell you how much of a down payment you will have to come up with in order to get a loan.

So before you go out and find the home of your dreams, make sure that you can get a loan. Mortgage calculators will give you a sense of what you can afford, but it is up to the lenders to make it happen.

We are constantly being bombarded with bad economic news. Well, finally there seems to be some good news on the horizon! James Smith, chief economist at Parsec Financial is quoted in the Chicago Tribune as saying growth will resume “no later than May 15.” Smith has strong opinions about how economies react to a panic, which in the current case is “about over,” he said. “After every one of these episodes, the economies affected usually come back stronger than before and more rapidly than we expect. The deeper they fall, the quicker the rebound.” He believes that housing will rebound first, then vehicle sales, consumer confidence and small-business optimism.

So if you agree and feel that we may be ready for the economic recovery,  it’s time to start searching Chicago homes for sale so you’ll be ready to take advantage of the market before the rebound is in full swing!

If you are among the thousands of people waiting for home prices to bottom out, consider this November, 2008 National Association of Realtors survey fact:  Many homeowners now plan to stay in the homes for 10 years.  That’s three full years longer than the historical 7 years.  What does that mean to you if you are a ‘fence sitter’, waiting for the real estate market to bottom out?

It means that you can never perfectly time the bottom of a market.  It means that if your home is long term, or even middle term investment, this may truly be your best opportunity to buy real estate.  It means that many buyers will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime.  So reasons Ron Lieber in his December 6, 2008 New York Times article:   It May Be Time to Think About Buying a House.

First time home buyers especially have the advantage of not having to sell their current home before buying a new one.    And since more people seem to be making a longer commitment to their homes…not looking to build overnight equity…confidence in hard, home town assets makes sense right now.  “Since prices generally soften in the winter, it also makes sense to start looking seriously once the mercury bottoms out”.   If you wait until next spring to look, “you may find that you do not have the choice you thought you would have or be in the bargaining position you thought you would be”.

And in case you need yet another reason to consider getting off the fence, there are rumblings in the lending community about the federal government driving down 30 year mortgage rates to 4.5%!

Since much still depends on location, comparables, credit scores and mortgage rates, you should consult with your real estate professional and/or lending professional before taking the plunge, why not email Doug@LincolnParkLiving.com today and start your search before you are trampled by the spring ‘hindsight’ rush.

Courtesy of Pamela Butler, SellingSolutions@ameritech.net

SellingSolutions

Buying new construction in Chicago isn’t much different from buying a “resale” home.  What variances there are, however, can make all the difference between buying a diamond or a lemon.  Here are a few tips to keep in mind when buying new construction:

Tip #1: Don’t use the builder’s sales agent - hire your own.

If they’re the builder’s agent, they’re being paid to represent the builder, no matter what they tell you.  Committing to your own Chicago real estate buyers’ agent assures that you will have an advocate to assist you in understanding the contract, determining if the home is fairly priced, selecting upgrades, and recommending an inspector that is well versed in the nuances of new construction. Plus your buyers’ agents’ compensation is paid by the developer. You should also be willing to sign an exclusive buyer agency agreement to solidify your relationship with your agent

Tip #2: Find your own lender.

Going thru the builders’ preferred lender may provide you with some benefits, such as being able to close your loan even if you are the 1^st buyer to close. But you may be giving up some things as well, such as 1^st time buyer programs not offered thru all lenders, or better rates since an outside lender might be more aggressive in looking for better rates & programs. Having your Chicago real estate agent refer you to lenders that they have a working relationship with usually helps in having a smooth transaction! Otherwise, you should talk with any lender or banker that you already have a relationship with.

Tip #3: Talk to a Chicago real estate agent or lawyer.

Keep in mind that the developer’s attorney wrote the contract, so it is typically slanted to their best interests. Asking about cancellation rights, when the balance of your earnest money is due, when is the targeted decision dates for upgrades and any additional monies is due for them are services your agent provides to assure you understand both your liability and your commitments. 

Tip #4: Decide what options or upgrades you want.

Every builder has a different business model, but for most, upgrades are a profit center, so spend wisely! Early on, you should find out if your lender allows the upgrades you’ve chosen to be added to the loan. They will need an accounting of your selected upgrades that you are intending to wrap into your loan. If your lender doesn’t allow this, the cost of the upgrades will come out of your pocket in cash. 

Tip #5: Research the builder.

It’s amazing how many people think a builder is good, simply because they can build a house or condominium.  Unless you’re a licensed home inspector, the chance of you catching a cut corner or shoddy building practices is slim to none.  It’s prudent to check out other projects the builder has done, find out if there are any pending lawsuits or building code violations against them, if they are jumping from one project to another because of an increase in contracts on one building and a decrease in contracts in another?

Owning newly constructed Chicago real estate and knowing that you’re the first person to live in the home can be a wonderful, exciting experience.  Make sure that you protect yourself so you can enjoy it!

If you are thinking of buying new construction, it’s critical to decide upfront if you want the benefits of having your own buyer’s agent as your advocate.    If you visit a builder’s model without your agent, the odds are great that they won’t be able to represent you with that builder.  While I personally disagree with that practice, many builders will hold to that policy and in effect place you in a dual agency situation where you don’t have your own exclusive representation.

I’m available via email or my mobile - 312.953.8685 - should you want to find out more about how I can help you work thru all of the nuances when buying your new construction home.

If you’re looking at Lincoln Park homes for sale, it makes sense that you might also be looking at mortgage loans.  There are several types of loans, but they all fall into two categories: government loans and conventional loans.

Government insured loans are FHA, VA or RHS (Rural Housing) loans and have specific criteria to be eligible.

Any loan that doesn’t fall under FHA, VA or RHS are conventional loans; conventional loans can be conforming or non-conforming.

• Conforming Loans follow guidelines set out by Fannie Mae and Freddie Mac, which establish suitable properties, maximum loan amounts, borrower credit and income requirements and down payments.

• Jumbo Loans are above the maximum loan amount established by the guidelines, and are non-conforming loans.  They’re bought and sold on a small scale, and often have higher interest rates than conforming loans.

• B/C Loans don’t meet the borrower credit requirements set out by the guidelines.  This type of loan is offered to borrowers that filed for bankruptcy, foreclosure, or have late payments on their credit reports.  What interest rates and programs you qualify for depend on your financial situation and credit history at the time you apply for a mortgage.

• Fixed Rate Mortgages (FRMs) have fixed interest rates and monthly mortgage payment for the period of the loan.  In general, you can get a lower interest rate for a shorter loan term.  FRMs are available for 10, 15, 20, 25, 30 and 40 years, though 15 and 30-year loans are the most popular.

• Balloon Loans are short-term FRMs, usually based on a 30-year schedule, with a lump sum payment at the end of a 3, 5 or 7-year term.

• Adjustable Rate Mortgages (ARMs) have fluctuating interest rates and monthly payments.  The lender makes periodic adjustments to the interest rate, based on changes in a defined index that is established at the time of your application.

When looking at the different types of mortgage loans, remember that it’s important to choose the right mortgage for your situation.

Find thousands of Lincoln Park homes for sale and shop from the comfort of your own home on my website at LincolnParkLiving.com.  Or, let me do the searching for you.  Just give me a call (312.953.8685) or shoot me an email (Doug@LincolnParkLiving.com) and I’ll set up a home search for you, which you can modify or add searches as you wish.

Being declined for a mortgage is frustrating, especially after you’ve found your ideal home. If this has happened to you, you’re not alone. Lenders deny mortgage applications every day for any number of reasons. Here are some reasons lenders may decline loans for Lincoln Park homes.

• 1. Limited credit history. Lenders are taking a risk when they loan you money for a home. For this reason, they determine your risk by reviewing how you have managed credit in the past. If you have no credit history, the lender won’t be able to tell if you will repay your loan or not. If you are moving from out of the country, it’s critical that you talk with your lender to verify that you have a U.S. credit history and that the currency you are compensated in will qualify you for the type of loan you are looking for.
• 2. Poor credit history. If you have defaulted on loans or overextended yourself in the past, lenders may be afraid you will do the same thing to them. The lenders don’t know you personally, so they look at your past credit behavior to see how likely you are to pay them back. In today’s crazy lending world, your credit score plays an even more critical role in getting a loan. In fact, many lenders have varying rates for different credit scores, the higher your score, the lower your rate. If that isn’t proper motivation to have a high credit score, I don’t know what is!
• 3. Too much credit. As strange as it sounds, lenders sometimes turn down loans for Lincoln Park homes because the borrowers have too much credit available to them. If you have several credit cards with high limits, lenders may be afraid you’ll use all this available credit and then be unable to pay your mortgage payment.
• 4. Inconsistent housing. Lenders look for stability because it makes you look more responsible. If you move frequently, whether it’s across town or across the country, you can appear unreliable. This makes you a credit risk to lenders.
• 5. Insufficient income. Lenders want to make sure you’ll be able to make your monthly payments. If you are self-employed, have changed jobs frequently, or rely on commissions as a substantial portion of your income, lenders may view this as an unstable income. They may think you won’t make enough money each month to pay your payment.

Don’t waste your time or gas driving around looking for Lincoln Park homes for sale. I can help you. Search thousands of homes for sale from the comfort of your own home at LincolnParkLiving.com. Call 312.953.8685 or email me at Doug@LincolnParkLiving.com, and I’ll set up the searches for you.

Last week, I saw these two articles and I figured they probably flew under the radar. I was thrilled to see that, at least in Illinois, there seems to be a local effort to help the local people and businesses.

The MacArthur Foundation is giving $68mm to local organizations to help battle the home foreclosure crisis. “The scale of the foreclosure crisis threatens to disrupt hard-won gains in many of Chicago’s lowest-income neighborhoods,” said MacArthur President Jonathan F. Fanton. “Nowhere is this work more urgent and nowhere is it more important to us than in the city we call home.”

In a separate story, the Illinois Treasurer is planning on making a $1B deposit into the state banks in an attempt to dismantle the credit jam. Under the plan, any state-chartered bank or national bank with an Illinois branch may request as much as $25 million. The major banks from which President Bush proposes the federal government buy $250 billion in shares using the federal rescue fund are not eligible, according to the Crain’s Chicago Business article.

The State of Illinois and the MacArthur Foundation - local groups helping the local economy - a very exciting concept if you ask me. I hope other states and Foundations follow this lead. What are your thoughts?

With their original floor plans and fascinating histories, historical homes can make interesting places for your family to live. However, buying a historical home can be different from buying a traditional home. You have to consider more than just the neighborhood and home features. Before you buy a Chicago historical home, be sure to ask these four questions.

1. What are the local historic district regulations? Historical homes are usually registered with a historical building organization, such as the National Registry of Historical Homes, that sets standards for what qualifies as a historical home. These organizations have rules that specify everything from what paint colors you can use to acceptable window upgrades. Make sure you can live with these rules. While the National Registry provides some excellent information, The Chicago Landmark Ordinances provides in-depth local information.
   

   Historic Old Town Triangle Row House

2. Will the home need any renovations or restorations? Home repairs for a Chicago historical home can be costly. Not only will you have to find specific materials and follow specific guidelines, you will also have to find workers who are skilled enough to complete work on delicate properties. The costs for the renovation/restoration should be taken into consideration when preparing an offer to purchase a home of historical significance. For additional reading, check out Historic Chicago Greystone renovating
3. Can the home be repaired or restored with appropriate materials? Historical homes are subject to standards that govern the home’s appearance, and this can limit the work you can do on the home. For example, if you want to paint your home’s exterior, you may be required to use certain colors to maintain the historical designation.
4. Will the home retain its value? Your home is probably your most significant financial investment. Chicago is an old housing market and has an abundance of homes with historic or architectural significance. So when buying a Chicago historic home, while there are no guarantees of appreciation, the chances are better that they will maintain their value over some of their newer counterparts. It’s still prudent to look at the neighborhood and the values of other homes in the areas so you are making the best possible financial decision. Just because a home has a notable history doesn’t mean it will hold its value over time.

If you’re looking for a unique home for your family, a Chicago historical home may be right for you. No matter what type of home you’re looking for, I can help you find the perfect home to meet your needs.  Call 312.953.8685 or email me at Doug@LincolnParkLiving.com today to discuss how I can help you.