Monday, July 19, 2010

Financing your real estate purchase

So you are looking to purchase property. Maybe you have done it before – so this will be a refresher or maybe this is your first time or possible the first time in the “jumbo” loan category. I thought it might be helpful to cover some basic information and some of the differences between loan type and lender.

Loan Rates:

Rates are wonderfully low right now and this has made home ownership – along with a softer market - incredibly affordable.

Rates will vary depending on the loan type, (e.g. fixed, adjustable…) the demand for that particular type of loan, length or term of loan (e.g. 15 year, 30 year…), your credit worthiness (typically your credit score), loan to value ratio (i.e. what is the % of the loan you are putting as a down payment) and more recently the credit worthiness of the building where your property is located (assuming a condo/co-op).

Type of Loan

A conventional loan is a loan that is less than $417,000. A Jumbo is for any loan amount over $417,000 and it usually comes with a higher rate (bigger value, bigger risk for the lender and therefore they charge more). $417,000 is very low for many pricier areas of Chicagoland and there is an active effort on the part of the real estate community to get this bar raised so that loans above $417,000 can get more reasonable rates of interest.

Let’s do some quick comparisons using the bottom of the range of available rates for each loan in Chicago based on

The 15 year costs more monthly but builds equity faster with a lower interest and a quicker repayment of the principle - saves over the long haul

The Jumbo charges more so if you could add to your down payment to get below the $417,000 you could save 10% monthly and over the life of the loan.

Loan choices should be made with the help of a professional lender. Give me a call and I will make some suggestions about folks that can help you find just the right loan for your particular needs.

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