Illinois Mortgage Loan Programs With Bad Credit And No Overlays
This Article Is About What Illinois Mortgage Loan Can I Afford
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 the personal expenses of borrowers such as the following:
- Educational expenses
- Groceries and living expenses
- Other expenses
Cost Of Becoming A Homeowner
There are additional costs in becoming a homeowner and the costs associated with buying a home. Here are some basic costs on 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 a 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 homeowners 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 an 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.
Home buyers can get reduced interest rates by buying down the rate with discount points. Any leftover funds on sellers concessions are 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 a 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 the 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 an Illinois mortgage loan
- Gustan Cho Associates are direct lenders with no lender overlays on government and conventional loans
- We can help you qualify for a mortgage loan in Illinois as well as other states
Please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at [email protected]