Late last year the FHA let it be known that their reserves had dropped below 2%.  As Congress set this minimum the news that the reserves had dropped below it spawned a call to bolster the weakening FHA.  Currently a vast majority of new home buyers purchase their first home with FHA loans.  As such any changes to the FHA will undoubtedly effect this huge group of potential new buyers.  While no changes have been announced yet, the National Association of Realtors claims this week we will see major changes to the program.  This announcement comes after months of delay and while Congress and the powers that be have the best intentions the proposed changes have many people a little worried.

Their goal is to improve loan quality, increase mortgage insurance premiums, change requirements for lender eligibility, and overhaul it’s approach to risk management.  Here is a break down of the FHA guidelines now from the buyer’s perspective.

FHA Borrower Guidelines Now:
-3.5% Minimum down payment
-Money may be gifted at any amount
-Borrower can ask for up to 6% closing cost credits from the seller
-Minimum credit score of borrower: 620
-Up-front premiums are currently 1.75%
-Up-front insurance premiums (MIP) can be financed

Possible New FHA Guidelines:
-3.5% minimum down payment - remain the same or slightly higher
-Money may still be gifted
-Reduction of closing cost credits (seller concessions) to as little as 3%
-Higher credit score requirement
-Raise up-front Premiums to 2.25%
-Borrowers may no longer be able to finance up-front insurance premiums
-Impose a loan-to-value maximum based on credit score

Let’s discuss a few of these changes:

Down Payment
First of all, the down payment requirement of 3.5% has been one of the most attractive features of FHA loans.  Combined with closing cost credits of up to 6% of the loan value a buyer could essentially buy with almost no money out of pocket.  This seems great from the buyer’s perspective however starting off upside down on a mortgage is a scary concept to those who look at the bigger picture, especially given that thousands of similar loan scenarios are written every day.

Closing Cost Credits
As it stands a borrower can ask for up to 6% closing cost credits from the seller.  If the closing costs do not equal 6% of the purchase price a borrower is not entitled to the remainder.  That is, there is no “keep the change” provision.  Currently,  at least in the Chicago market, it is rare that closing costs would go anywhere near the 6% mark.  As such a reduction to 3% would only effect a portion of those seeking FHA loans.  This is because of two reasons: Not every negotiation results in closing costs being granted to the seller and when they are, not all negotiations result in the full 6%.  For those who would benefit from the 6% they will be the most significantly impacted and in some cases may not be able to move forward with their purchase.

Higher Credit Score Requirements
Right now there are some potential home buyers that have a lot of money to put down but have for one reason or another acquired a blemish or blemishes on their credit report and do not qualify for a conventional mortgage despite their large down payment.  Currently these type of people have one way to go; FHA.  If the minimum credit score is raised it is conceivable that a buyer looking to put down, say 30-50% may not be able to qualify for a mortgage because of that $200 medical collection they’ve had since college, or the divorce they had two years ago, etc.  While it is true that credit improvement efforts may be enacted many of those efforts may not come to fruition in time for the buyer to take advantage of the low prices and interest rates that were motivating them to buy now, when we need it most.

Loan-To-Value Ratios Based on Credit Score
While it is easy to understand the motivation behind this change it may have similar effects as the previous example by eliminating those home buyers that had an unfortunate event lower their credit score but not diminish their ability to pay a mortgage.   There are so many examples of scenarios that can ruin a person’s credit that have nothing to do with their ability to pay their bills and this change could prevent them from obtaining the one type of loan that could get them in a home.

Increase MIP and Elimination of the Ability to Finance MIP
The MIP is basically the FHA’s version of mortgage insurance.  As it currently stands the borrower may finance this expense and therefore does not have to come up with this money out of pocket.  This proposed change would not only increase this expense by half a percent, it would take away the borrower’s ability to finance it.  It goes without saying that this would eliminate potential new home buyers due to insufficient capital to close.

Over all these changes mean one thing for the borrower and potential new home owner; MUCH higher higher out-of-pocket expenses.  Conversely it means a much more secure future for the FHA program and therefore a more stable and accountable system for those who do still qualify.  It is hard to deny the importance of a more stable housing sector.  That said, buyers, sellers, Realtors and mortgage brokers must prepare themselves for these, and other unannounced changes to come to fruition and change the playing field.  One thing of note is that these changes may only be temporary to pull the FHA out of it’s sagging financial situation, but they’re not making any promises one way or the other.  Whether or not these changes will be enough to slow down an already struggling housing market remains to be seen.

Does your Chicago home have a hot water recirculation system? If not, you may be missing out on an opportunity to save money on your utilities bill this January.


A hot water recirculation pump is a device that delivers hot water to faucets faster than the usual low-pressure system. In speeding up the process, you get hot water within seconds of turning on your faucet. This conserves water because you no longer have to let the water run for minutes at a time while waiting for the temperature to go up. It also saves energy because you can set the device to only run when you need it (for example in the evening before you do the dinner dishes). There is an on/off switch that allows you to manually turn on the pump, or the devices often have a timer or thermostat that lets you set the pump to automatically go on and off when desired.


The system also takes water that has been sitting in the hot water lines and has already cooled and sends it back to the hot water heating tank via the cold water line. So the water is recycled rather than discarded through the drain, which is what happens when you run water through the faucet waiting for it to heat up. By some accounts, adding a hot water recirculation pump can save up to 10,000 gallons of water annually (dependent on the size of your home).


The hot water recirculation pump can be used with your current setup and should not require any alterations to your plumbing system. Handy homeowners can probably install the pump on their own. But less experienced do-it-yourselfers may want to consult a professional. The recirculation pump system can be retrofit to your existing plumbing for as little as $200. You should be able to purchase the components at any big box home improvement store or online.


The big benefit of a hot water recirculation pump may be to reduce water consumption and decrease energy use… but just think how nice it will be to have that hot water ready and waiting on those cold wintry days!

Are you thinking about putting your Chicago home on the market? Here is some helpful advice on what your listing should include and how to make it as attention-grabbing as possible.

 

1.) Include a well-written, error-free detailed description of your Chicago home. Mention the most enticing features upfront (think about what attracted you to the property when you bought it) and try to paint a picture for people reading the listing.

2.) Post property photographs that were taken with sufficient light and good composition. The angle, steadiness and lens of the camera can greatly affect how your property looks, so have a professional do the job to get pictures that really showoff your Chicago home.

3.) Put your listing on the Chicago MLS. This will be done by your listing agent. It ensures your listing is part of the main database of homes for sale in the Chicago area. The MLS is used by realtors to list properties for their sellers and locate properties of interest for their buyer clients. Consumers can also access these listings through certain Chicago real estate websites.

4.) Provide complete property detail information. The more info you display in the listing, the more likely you are to get buyers who are seriously interested in what your home offers – as opposed to those who realize when they arrive that the property doesn’t have the attached garage they wanted, for example.

5.) Explore additional opportunities to get your listing more online exposure. Before hiring a listing agent, inquire about their web site’s Internet ranking and how they can promote your property through email blasts, web positioning and other e-marketing options.

An extension of the homebuyer tax credit was enacted in early November. It is now available until April 30, 2010. The credit was also expanded to include “move-up” and “trade-in” buyers. Non-first-time buyers must have owned and lived in their current home for at least 5 consecutive years of the last 8 to be eligible. First-time homebuyers can still receive up to $8,000, while the max for repeat buyers is a $6,500 tax refund.

 

Under the newly instated tax credit extension, homebuyers have until the end of April, 2010 to secure a written contract and until the end of June, 2010 to close. The previous deadline was November 30, 2009. The 5-month extension is expected to boost the number of sales during the typically slow winter selling season.

 

October home sales increased drastically over the previous year – a sign that the first-time homebuyer tax credit did, in fact, persuade buyers to come down off the fence. In Chicago, condo sales went up 29% last month from the same month a year ago. Purchases of existing single-family homes and condos saw a 28.5% jump in the city and a 33% rise in the Chicagoland area.

 

New stipulations of the extended homebuyer tax credit include a home price cap of $800,000 and real estate transactions between close family members are no longer eligible. The income caps for both individuals and married couples, however, were raised. Now, individual taxpayers making $125,000 or less are eligible for the full amount, as are married joint filers who do not make over $225,000 per year. In all cases, buyers have to submit documentation of their home purchase with their tax return to get a refund check.  

 

The tax credit is for 10% of the home’s purchase price, up to $8,000 for first-timers (which includes those who have not owned a home used as a principal residence in the last 3 years), and up to $6,500 for repeat buyers. Buyers can consult an accountant for more specific details and to find out whether they qualify for the tax credit.

A single-family home in the North Side neighborhood of Lincoln Park sold for $5.6 million in August—the highest price paid for a Chicago residence in 2009.

 

Lincoln Park is one of Chicago’s exclusive luxury markets. The tree-shaded blocks are prime real estate lined with multimillion-dollar houses and high-end condominiums. So it’s not surprising the city’s priciest home sale of the year occurred in this posh pocket of upscale dwellings.

 

The spacious 12,000 sq. ft. mansion that brought in top dollar is located on the 2000 block of North Howe Street, right in the center of Lincoln Park. It’s a newly constructed brick and limestone home with 6 bedrooms, 5.5 bathrooms and a 4-car attached garage. The four-story floor plan is equipped with an elevator and includes a home theatre, bar and billiards room, deluxe kitchen, and a rooftop putting green. As you might expect, the residence enjoys top-of-the-line finishes and state-of-the-art amenities. Dark wood and custom details flow from one room to the next. Spa-like bathrooms incorporate natural stone and oversized soaking tubs. Every square foot is awash with elegance and first-class style.

 

The selling agent for the Howe Street residence was Christine Carr from Dream Town Realty . It was on the market for less than 2 months and sold for $399,000 below the list price. The property hit the MLS late May and was under contract by mid July. It closed on August 25th for $5,600,000, making it the most expensive 2009 home sale in Chicago to date.

 

You can view available Chicago luxury home listings here.

 

Quick Facts

Price: $5,600,000

Address: 2021 N. Howe Street

Neighborhood: Lincoln Park

# of Bedrooms: 6

# of Bathrooms: 5.5

# of Rooms: 17

Square Footage: 12,000

Year Built: 2007

Parking: 4-car attached garage

Exterior: Brick and Limestone

Days on Market: 56

List Date: 5/21/09

Close Date: 8/25/09

Before you select a Chicago Real Estate agent to assist you with your home buying needs, it is smart to interview a number of different candidates. This will help you determine with confidence whether or not you have the right agent for the job—and the right agent for you!

 

Ask friends, family members and coworkers for recommendations of agents they have used in the past. You can also check out local real estate agencies or use the good old-fashioned newspaper to find agents in the real estate section. You can also contact your Better Business Bureau (www.bbb.com) for additional names. Chances are your compiled list of agents will be from a number of different real estate companies. Research the various firms online and visit their websites for more information about each place. This can help you narrow down your options. Now, you are ready to set up some interviews.  


During your meeting with an agent ask what he or she can offer you that is different from other agents. How does their firm set themselves apart from the competition? What benefits do they promise and what limitations do they have? Inquire about their successes in the Chicago Neighborhoods/Areas in which you are looking and ask for examples of transactions where the agent got the best price for other clients. Question the agent about challenges of the current market and how he or she can help you overcome those challenges. What does the Chicago Real Estate Agent know about available buyer incentives (both federal and local)? Remember, experience is important, but you also want to know an agent is up-to-speed on today’s market and the factors that impact your buying power.

 

You can also request references or testimonials from the agent’s past clients. Keep in mind they will only direct you to those who have had a good experience, but you can judge by the amount of positive feedback how someone performs on a regular basis. As you are talking with the agent, you’ll also get a feel for how you mesh with that person. This is important because your agent is going to be your trusted advocate and representative throughout the home buying process. You should be completely comfortable with them. Does the agent listen to you? Ask you pertinent questions? Do you feel at ease with the agent? What concerns or reservations do you have about the agent? A home purchase is a huge life decision and you should have someone you can depend on and be yourself with through every step—the ups and downs, fun parts and stressful times, start to finish.

 

Considering the average amount of time it takes to find a home and close on it is 2-3 months, buyers who want to get the $8,000 first-time home buyer tax credit don’t have much time to spare. The program expires after November 30 (exactly four months away) and the clock is ticking for buyers to close before the deadline.

Real estate agents are aware of the closing window on the federal tax credit and are starting to put an emphasis on the importance of acting now. For buyers who want to take advantage of the credit, it’s essential to get their home under contract as soon as possible—especially because many are dealing with short sales and foreclosures, which typically take longer to finalize than traditional real estate transactions. You can easily wait a month or two just to hear back from a bank on an offer for a distressed property. And issues with appraisal value and mortgage approval can also hold up proceedings. So even with a signed contract, the closing may be several months off when all is said and done.

 For buyers who don’t start the process soon enough, any delay can mean the difference between getting a tax break and missing out on great savings. The credit is a tax refund, so you get cash back on your 2009 return (as long as you don’t owe that much in taxes). Remember, the tax credit is equal to 10% of the purchase price, up to $8,000. So any home bought for $80,000 or more qualifies for the maximum amount.

Also something of note… the term “first-time buyer” is used loosely here. It refers to anyone who has not owned a primary residence in the 3 years prior to purchase. There are income limitations, though, which kick-in for individuals who make more than $75,000 per year and married joint filers with adjusted gross income of more than $150,000.

Home buyers: You must be closed by Nov. 30 to qualify for the $8,000 first-time home buyer tax credit. If you’re looking to cash in on the credit, it’s time to get serious. In today’s housing market, four months doesn’t leave a lot of wiggle room, particularly for those interested in distressed properties.

The service of a professional stager can be invaluable when it comes to selling your home in Chicago. At a time when there is a lot of inventory buyers are extra picky about what they want and what they are willing to settle for in their home purchase. There is so much new construction on the market that your existing home needs to have a fresh, clean “look” to get buyers’ attention at all. This can be accomplished through the creative talents of an Accredited Staging Professional (ASP). Surveys conducted in North America show that staged homes are on the market 80% shorter time than un-staged properties and sell for higher prices, too.

The return on investment for staging easily exceeds 300%, which means you recover the costs of staging AND get more for your sale. Staging practices can be as simple as de-cluttering and brightening or as involved as bringing in rental furniture and re-diverting the focal point of main areas.

Now more than ever, it is important that your house or condo shows well inside and out. An ASP can ensure the interior space is not only attractive, but used in the best possible way to showcase each room’s utility and design elements. Stagers are pros at reinventing tired, old properties into inviting, updated living spaces that any buyer would be proud to call “home.”

The new government bill intended to help jumpstart the nationwide housing market is big news for the real estate industry. The legislation was approved by the White House recently and is now making waves in media reports and real estate firms across the country. This is especially exciting for first-time home buyers because you stand to receive a special tax credit of up to $7,500 on your new home purchase.

So how does this work and who exactly is entitled to the tax credit under the new law? I’ll break it down for you:

- First-time buyers and buyers who have not owned property for the past three years are eligible

- The tax credit can be used for new construction or resale homes, as long as it is the buyer’s primary residence

- The tax credit is for 10% of the home’s purchase price, with a maximum cap of $7,500 per couple who file federal income taxes jointly (or $3,750 for individuals)

- The tax credit pertains to properties bought from April 9, 2008 through July 1, 2009

- Buyers with adjusted incomes above $150,000 (for joint filers) and $75,000 (for individuals) are excluded from the tax credit. However, partial credits are available for some buyers whose incomes exceed these cutoff points.

- The tax credit acts like a zero-percent loan that must be paid back within 15 years. Why do you have to pay it back, you ask? Because it is meant to give buyers the biggest financial boost possible in order to jumpstart the housing market, increase sales and stabilize prices. The government would not be able to dish out as much money otherwise.

- This is a dollar-for-dollar reduction, so the amount of the tax credit is subtracted from how much you owe in income taxes, not just a percentage of the credit (like with a tax deduction)

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