Am I better off renting or buying?
The decision to rent or buy a home differs for everyone, as there are benefits to both. Buying a home could be a better deal for you depending on how long you plan to live in your home and the loan you choose. A home purchase gives you personal benefits such as a sense of investing in your community and pride for achieving the dream of homeownership. There are some strong financial benefits as well, especially the tax savings you may enjoy. Interest payments on a mortgage are typically tax deductible (consult your tax advisor for more information). As you continue to make mortgage payments, you'll build home equity, as opposed to paying rent to someone else. With today's low down-payment options, a home purchase may be easier than you think.
How much do I need for a down payment?
Your down payment requirements will depend on your lender, the type of home loan you choose and the type of property you are buying. Your required down payment can range anywhere from 3%-20% of the home's purchase price.
Should I get prequalified or preapproved before finding a home?
You don't have to apply for a loan before looking for a property. It is, however, a good idea to get prequalified or preapproved before you find a home; many real estate agents will take your offer more seriously if you've been preapproved. Also by going through this process, you'll have a better idea of the price range of homes that you might be able to afford.
Can my parents give me the down payment money for my new home?
A gift is direct financial assistance from an immediate family member for the purpose of purchasing Chicago real estate. The amount of the gift is unlimited, but often times specific programs have minimum requirements for the actual borrowers to bring money to closing. The donor simply needs to provide a signed gift letter, which provides verification of the amount and the source of the funds. One major consideration that often complicates the gift process is the tax implications for the donor. Generally, a $13,000 gift is allowable before taxes apply. One method of maximizing the tax-free portion of the gift is breaking it up among family members. An example of this scenario would be where each parent in a spousal couple would gift up to $13,000 to their child to a total amount of $26,000 without tax implications. Another means of maximizing a gift without incurring taxes is to separate the gift between multiple years. With a bit of planning, gifts in excessive of $13,000 can be broken down into multiple gifts with a portion gifted prior to the December 31st and the remainder gifted after December 31st. Because of this, the end of the year becomes an opportune time for donors and their recipients as the time required for the separation is at a minimum.
What is title insurance and why do I need it?
Title insurance is an insurance policy that protects you against loss that could result from defects in the title of the property you are buying. The premium is paid only once and is good until the property's ownership changes. Unlike most types of insurance which protect policyholders from future events, title insurance protects you against defects that could already exist.
What is underwriting?
Underwriting is simply matching up a borrower's financial situation with the specific guidelines or requirements of a particular loan program. The aim of this process is, in fact, very simple. It is almost like working down a checklist. The execution of the process can be anything but simple. To begin with, there is not a single set of guidelines. The risk management groups of the banks who issue the loans create guidelines for each individual program. These guidelines are very specific requirements and they define what degree of creditworthiness is acceptable for the level of risk for the loans. They usually number from 20 – 40 specific requirements and each requirement must be met for the loan to be approved. To add to the complexity, each client file is different. I have been in the business since 2002 and have yet to feel that I have seen the same deal twice. Granted there are similarities in the assets, employment or credit rating of individuals, but each client is the sum of their individual parts. When aggregated, these variables create an infinite number of combinations that must, in turn, be mapped onto the aforementioned program guidelines. This process of matching up the borrower to the guidelines is not speculative or subjective in nature. On the contrary, it is purely objective. An email or verbal verification of a particular aspect of the client is not good enough. Only cold, hard factual data allows the underwriter to objectively decide.
Welcome Lincoln Park Chicago home buyers!
Friday, September 21, 2018
Now is a GREAT time to buy in Chicago's Lincoln Park neighborhood! If you are in the market to buy a home, take advantage of today's historically low rates & have your money work for you!
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