When applying for a home loan from a Chicago mortgage company, especially if you are a first time homebuyer, it can seem like a long and confusing process. Understanding the exact terms, what they mean and your choices in home mortgages can help you to achieve peace of mind for the largest investment of your life.
Pre-Approval vs. Pre-Qualification
The majority of home sellers prefer to deal with a prospective buyer that is pre-approved. Pre-approved is when you are already approved for a loan amount before you shop for a home. The loan is written and the lender agrees to pay a certain amount for a home. Pre-qualification is the determination of the highest loan amount a person can borrow.
When you are shopping for a mortgage lender, ask them what the interest rate is. This gives you a tool to compare all the lenders interest rates and make an informed decision.
What are Points?
A point is an amount that you pay to the lender at the closing of your new home and in exchange, you get a reduced interest rate. A point is 1 percent of the total mortgage amount. Ask how many points are included in the interest rate cost and should you buy more or less.
The larger your down payment that you can manage to put down, the better the interest rates and terms you can secure. Most homebuyers try to put a down payment of 20 percent on a home. Your down payment also affects your interest rate and terms, which in turn affects your monthly payments.
Fixed Rate or Adjustable Rate
A fixed rate mortgage has the same interest rate for the entire term of the loan. The payments will always be exactly the same each month and you know what to expect in advance. An adjustable rate mortgage fluctuates with the market and can fluxuate up and down throughout the loan period.
What is the Best Mortgage?
After your Chicago mortgage company receives all of your paperwork including proof of income, list of assets and your credit history, ask them which type of loan is best for your particular situation. An informed lender should be able to direct you to the best type of mortgage for your exact situation.
Make an appointment with an experienced Chicago mortgage company to understand all the aspects of a home mortgage.