How Rising Interest Rates Are Impacting Mortgage Rates

Anyone interested in buying a home with a mortgage has probably heard about rising mortgage rates recently. Rates have been steadily climbing since 2022 and are almost double what they were a year ago. Whether mortgage rates go up or down, underlying interest rates set by the Federal Reserve always affect them somewhat.

Learn more below about how rising rates are affecting mortgage rates. Then, if you need help with your next real estate transaction, the Illinois real estate attorneys at Covert Marrero Covert LLP are ready to assist.

Why Do Mortgage Rates Go Up With Interest Rates?

When underlying interest rates rise, mortgages are more expensive than their rates. This makes buying a home more costly for most Americans. When homes cost more to purchase, this usually slows the housing market.

Experian explains that when the Federal Reserve raises rates, it alters its target for the federal funds rate. This is the rate that the board of the Fed advises banks to charge when they provide loans to other banks.

For the most part, banks put 3% on top of the federal funds rate when establishing the prime rate for customers. So, for example, the federal fund’s target rate was 1.75% in July 2022, and the prime rate was 4.75%.

If you have a fixed-rate mortgage already, the good news is the rising mortgage rates do not affect you. However, if you have an adjustable-rate mortgage, the increasing rates could cost you more when the fixed period expires.

What Happened In 2022 To Mortgage Rates?

In 2022, the US Federal Reserve raised the federal fund’s interest rates several times due to rising inflation. Increasing interest rates make borrowing money for homes, cars, credit cards, and much more expensive. Increasing interest rates is the primary tool that the Fed has to slow the economy and tame inflation.

While paying a higher interest rate on a mortgage is not what most people want, slowing economic activity reduces inflation, and that keeps prices for everything else under control.

For 2023, many financial experts expect we will have peak mortgage rates in the 6-7% range. Some expect rates to level off at around 5% to 5.5% in 2023. However, we may not see 3% rates again for a long time.

How To Save On Your Mortgage

When rates are rising, everyone wants to save on monthly payments. How? First, put down 20%, so you don’t have to pay mortgage insurance. Then, if you think you will only be in the home for a few years, consider an adjustable-rate loan for three or five years with a lower rate.

Contact An Illinois Real Estate Attorney Now

Are you interested in buying a home in popular Schaumburg communities like Haverford, Hidden Ponds, or Spring Cove? Then you will be interested in getting the best mortgage loan at the lowest rate. With so much turmoil in the real estate market and rising rates, now is the time to rely on an Illinois real estate attorney for help with the transaction.

Our attorneys at Covert Marrero Covert LLP can help with your next real estate purchase. Please contact our Illinois real estate attorneys today at 630-717-2783. Our attorneys work in the communities of Naperville, Warrenville, and Schaumburg.

How To Know When To Seek A Home Loan Modification

You may have heard about home loan modification if you have a mortgage and struggle to make on-time payments. Loan modifications offer long-term relief for homeowners who cannot afford their mortgages. If your lender approves the plan, you may avoid foreclosure, receive a lower interest rate, and receive other benefits to ease your financial burden.

When should you consider a loan modification? Keep reading to learn more, and speak to our Illinois home loan modification attorney at Covert Marrero Covert LLP for more information.

Home Loan Modification Overview

A home loan modification involves changes to your mortgage so you can afford your payments more easily. Some changes in a loan modification include a lower interest rate or a different repayment schedule. However, most loan modifications do not lower your mortgage balance.

Your lender may let you modify your loan because foreclosures cost them more than modifications. So, the lender wants to avoid taking back the house because it is expensive for them. But they want you to continue making payments, so the lender may be willing to modify your loan.

When Should You Seek A Home Loan Modification?

Do you need help making your loan payments regularly? To put it another way, have you struggled to make payments for several months in a row because of a loss of income or increased expenses? Or, perhaps, you experienced a disability or divorce that affected your income. A modification may make sense in situations involving long-term problems meeting your loan obligations.

What About A Mortgage Refinance?

When the lender modifies your mortgage, it involves changing the terms to prevent a default. If the refinance will not accomplish these goals, it is not a viable way to reduce your monthly payment. As a result, most homeowners refinance to save money or take out cash.

What About Loan Forbearance?

Loan forbearance is a temporary pause of mortgage payments to help you through a short-term financial difficulty. During the COVID-19 pandemic, some homeowners put their mortgage payments on hold, but the payments must be made up.

Is A Loan Modification A Good Idea?

This option may be a good choice if you face long-term financial difficulties such as divorce, loss of income, or disability. If your loan provider approves the plan, a loan modification may offer long-term financial relief so you can keep up with your payments.

If you need help making payments, contact your lender to see if you qualify for a loan modification. If you think you will not have an increase in income soon, a loan modification may be the way to go. However, remember that some loan modifications may hurt your credit score unless the mortgage servicer reports it to credit bureaus as ‘paid as agreed.’

Contact An Illinois Home Loan Modification Attorney Today

Consider a home loan modification if you have difficulty making mortgage payments over a long period. The Illinois loan modification attorneys at Covert Marrero Covert LLP may be able to assist with your situation. Please contact our Illinois home loan modification attorneys today at 630-717-2783. Our attorneys serve the communities of Naperville, Warrenville, and Schaumburg.

Illinois Real Estate Market Forecast For 2023

Home sales declined and prices increased in the Illinois housing market in 2022 as mortgage rates rose. For example, 16,194 homes were sold in Illinois in May 2022, a 10% decrease from the previous year. Also, in May 2022, there were 11,641 homes sold in the nine-county Chicago region, which is a 10.6% drop from 2022.

What does the market hold for 2023? Keep reading to learn about the Illinois real estate market forecast for next year. Then, speak to an Illinois real estate lawyer at Covert Marrero Covert, LLP if you have a real estate question.

Housing Market Forecast For Illinois In 2023

Zillow reports that the median value of Illinois homes is approximately $267,000. The value of homes in Illinois has risen by almost 12% in the last year and 27% over the last 24 months. Home prices in the Chicago area will drop by approximately .9% in 2023. Here are some additional housing predictions for the Illinois housing market next year:

  • Malcomb, Illinois: 3.3% drop in home values by August 2023
  • Galesburg, Illinois: 2.8% drop in home values
  • Jacksonville, Illinois: 28% drop in home values
  • Taylorville, Illinois: 2.8% drop in home values
  • Charleston, Illinois: 2.7% drop in home values
  • Sterling, Illinois: 2.6% drop in home values
  • Danville: 2% drop in home values
  • Pontiac, Illinois: 2.6% drop in home values
  • Peoria, Illinois: 2.3% drop in home values

Illinois Listed As a Best State To Live In

While home prices will generally decline in Illinois in 2023, this reflects the trend occurring throughout the country during a time of high-interest rates.

WalletHub recently found that Illinois continues to be one of the best states in which to live. The 2021 survey found that Illinois is the #18 state to live in. It was rated as #3 in quality of life, #8 in safety, and #20 for education and health.

Also, statistics show that population and household growth lead to a boom in housing demand. A survey by the US Census found recently that the population of Illinois may be undercounted by up to 2%. So, population growth in Illinois could be higher than the statistics show. While house prices are dropping in Illinois for 2022 and 2023, this is mostly because of rising mortgage and inflation rates.

In the future, prices of homes in Illinois should rise again as inflation and mortgage rates drop. It could be a good time to buy a home in Illinois because of the reduced price growth in 2023. If you have a real estate transaction to consider next year, be sure to have it reviewed by a qualified real estate attorney.

Contact An Illinois Real Estate Lawyer Today

Whether you have a short sale, foreclosure, or other real estate action, the Illinois real estate lawyers at Covert Marrero Covert, LLP can help you. Please contact us today at (630) 717-2783. Our attorneys also serve the communities of Warrenville, Naperville, Joliet, and Schaumburg.

Steps to Take When Buying a Foreclosure

A foreclosure purchase is a bit more complex than the purchase of a listed property, but a great deal can make the hard work worth it. If your home is going into foreclosure, on the other hand, hire a foreclosure defense lawyer to fight for your rights.

How to Purchase a Foreclosed Property in 5 Easy Steps

Buying a foreclosed property involves these basic steps:

Step 1 – Find Representation

Before you look for foreclosed properties for sale, find an agent with experience. The purchase has several risks you may not be aware of before it is too late. A veteran real estate agent can pinpoint red flags, tell you if the neighborhood’s property values are declining, and locate top-quality bargains.

Step 2 – Get Pre-Approval

The foreclosure market is highly competitive – most investors pay cash upfront, so these properties sell fast. If you cannot pay for one immediately, get financing beforehand. To do that, get pre-approved for a loan. Find out the amount you can borrow beforehand to make an offer.

Step 3 – Shop Around For Foreclosed Properties

Once you know the amount you can offer, shop around for foreclosed properties with your agent. Compare similar options to determine their pros and cons before choosing. This includes the value of homes in the neighborhood.

You can find a listing in local newspapers, REO listings in banks, or on large real estate sites such as Zillow. If you choose the bank option, you will have to wait a bit for a response. This includes a showing to see if the property is worth your investment. A skilled agent will make the process easier and expedite it.

Step 4 – Executing a Sale

Whether you find a foreclosed property at an auction or through referrals from your agent, you must make an offer. Make sure it fits your budget, i.e., the loan amount you were approved for and any additional financing you can arrange.

Your budget should leave room for repairs, renovations, property taxes, closing charges, inspections, and insurance. If you go over budget, you may have to sacrifice some of these aspects, reducing the property value further.

Step 5 – Inspections and Liens

You can arrange an inspection as soon as you finalize an offer. But inspect the property yourself beforehand. Inspections can range anywhere from $400 to $800, depending on the options you pick. For example, you will have to pay more for an in-depth home inspection, including a radon and termite check and sewer and waterline assessment.

It would help if you also resolved liens beforehand. Most foreclosed properties have multiple outstanding loans that belong to different lenders. Hire a title company to sort through these and reveal/resolve conflicts before you get a loan for the purchase. Move towards closing when everything is resolved.

Contact Covert Marrero Covert for a Consultation Today!

If your home is undergoing foreclosure, you can appeal the decision with help from a foreclosure defense lawyer in Illinois from Covert Marrero Covert, LLP. We provide personalized legal services that can ease your stress, frustration, and fear. Don’t go against aggressive adversaries on your own. Contact us for a consultation today by dialing 630-717-2783.

Will Short Sales And Foreclosures Increase In 2023?

Foreclosures and short sales may increase significantly in 2023 in Illinois and the US. Home sales are low, and prices skyrocket as inflation takes over the nation. However, there has been an increase in home sales in the state compared to 2021. So while foreclosures and short sales are at an all-time high, these sales may tip the balance in an investor’s favor.

Housing Costs on the Rise in Illinois

Today, potential homeowners in Illinois must pay about $8,000 to secure a property. This includes $5,000 yearly for the mortgage. Skyrocketing inflation, increasing mortgage rates, and high property taxes have much to do with this and have also increased the cost of living. It is little wonder why foreclosures have more than tripled in Illinois compared to last year. Most people cannot keep up.

Amendment 1 will potentially make this dire housing and living situation worse. If it passes, it will make housing unaffordable for most people in the state. On average, they can expect to pay an additional $2,000 in property taxes in the next couple of years.

During this time, yearly property taxes have increased by more than $1,000, equal to five additional mortgage payments for Illinois residents. In total, housing costs may increase by almost $5,000 yearly for the same home you would get in 2022. This does not include maintenance and homeowner’s association charges.

Foreclosure Rates in Illinois

According to Market Watch, in metro areas, foreclosure filings increased by more than 95%, and Illinois was not the only state to go through this. New Jersey and Chicago also experienced skyrocketing filings, but California, Tennessee, Ohio, Florida, and Illinois topped the list. The rates went back to pre-pandemic levels in the first half of this year, but they may normalize by the first half of 2023.

Most foreclosure activities are based on loans delayed more than 120 days before the pandemic or already in foreclosure. Most of them were protected by the moratorium placed by the government. In other words, it was only a matter of time before foreclosure rates normalized again.

If your home or any other property is in foreclosure or at risk of a short sale, you have more options than you think. A DuPage County short sale attorney can detail them for you and provide the necessary paperwork.

Where will you and your family go if you lose your home? The pandemic has wreaked havoc on businesses leading to income loss on a massive scale. But you can still recover with help from experienced foreclosure attorneys.

Contact Covert Marrero Covert LLP for A Consultation Today!

If you have received a foreclosure notice or want to know more about short sales, contact our DuPage County short sale attorney at Covert Marrero Covert by dialing 630-717-2783. You must get legal help as soon as possible and before your debts increase. Our attorneys cover all the bases and ensure your interests are protected.

All of our consultations are strictly confidential, and the first is free of charge. If you wish, we can accommodate an off-site meeting or a meeting after hours if you are too busy during the day. Our attorneys speak various languages, so communication is not an issue. We can develop a custom strategy to help you avoid foreclosure or other positive results.