What Illinois Mortgage Loan Can I Afford?

This BLOG On What Illinois Mortgage Loan Can I Afford Was UPDATED On June 25, 2017

It is an important question to anyone who are first time home buyers or refinancing a home in Illinois to understand if they can afford an Illinois Mortgage loan. There are ways that lenders qualify mortgage borrowers. Lenders do not take into account personal expenses of borrowers such as the following:

  • Child care
  • Educational expenses
  • Utilities
  • Groceries and living expenses
  • Landscaping
  • Other expenses 

Cost Of Becoming Homeowner

There are additional costs in becoming a homeowner and costs associated with buying a home. Here are some basic costs on a home purchase:

  • Down Payment
  • Closing Costs
  • Moving Costs

Qualifying For Home Loan

Credit and Income are two main factors in qualifying for a home loan. There are minimum credit score requirements and debt to income ratio requirements to qualify for home loans.

  • For FHA Loans, minimum credit required is 580 FICO for 3.5% down payment home purchase mortgage.
  • VA has no credit score requirements but most lenders like to see 580 credit scores by veteran borrowers.
  • Conventional Loans require 620 credit scores.
  • Debt to income ratio requirements on FHA Loans is 46.9%/56.9%.
  • VA Loans do not have maximum debt to income ratio requirements.
  • Fannie Mae allows up to 45% debt to income ratio and Freddie Mac requires up to 50%
  • Borrowers need to analyze what mortgage payment will be affordable and safe.
  • Not what they qualify for.
  • Borrowers should go over other expenses they have besides interest, principal repayments, and other monthly expenses like taxes on real estate and home owners insurance.

Example Of Debt To Income Calculation On Illinois Mortgage Loan

  • To give an accurate example, if a borrower’s annual gross income is $32,000, they should not accept anything more than roughly $800 monthly with their Illinois Mortgage loan.
  • Or if borrower earns $50,000, those payments adjust to around $1,033 a month.

Adjustable Rate Mortgage

It’s a very valid possibility to take out a mortgage with a adjustable rate, that adjusts as your level of income changes over the years.

  • With an adjustable rate mortgage,  mortgage rates are generally lower than fixed rate mortgages.
  • ARMs are recommended for home buyers of starter homes or if the homeowner does not plan on living at the property for longer than 5 years.

Discount Points

Home buyers can get reduced interest rates by buying down the rate with discount points. Any left over funds on sellers concessions is used to buy discount points for reduced rates.

  • To make it simple, one point is 1% of the loan.
  • Home buyers who borrow $50k to purchase new home, one point will be $500.  
  • Mortgage Points are fantastic for reducing mortgage rates.
  • Borrowers who utilized the same $500 spent on one mortgage point as an additional down payment, they would only save roughly $20 a year at a 4% mortgage rate.
  • So thus once borrowers have paid the down payment, any extra money they may have available would likely be best spent buying mortgage points, in lieu of adding more money to original deposit.

Paying Off Debt

Many people wonder how can I possibly afford an Illinois mortgage loan when I have all these credit cards to pay off.

  • Really this question can only be answered by you, or someone with your direct financial information.
  • If you have any spare money available month to month after paying your mortgage, it is quite advisable to make payments on your current debt.

Cash Out Refinance Mortgage to Consolidate high interest rate debts

Mortgage loans are often much more affordable than credit cards, which charge up to 4 times more than a conventional mortgage loan.

  • So this effectively means that if you use a mortgage loan over credit cards, you can borrow up to four times the amount of money!
  • There are many other things to consider when lending, but these two things should be a great help to your decision in purchasing a Illinois mortgage loan. 
  • I am a mortgage banker and correspondent lender with no mortgage lender overlays and can help you qualify for a mortgage loan in Illinois as well as other states. 

Please contact me at 1-800-900-8569 or email us at gcho@gustancho.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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