You’re ready to buy a house, you know you’ll need a large loan for that. If you’re like most of us, you’re just a little nervous about it – we all fear rejection of any kind. There are, however, several things you can do to increase your chances of getting the financing you’ll need. So here are 7 tips to help you secure a loan in Chicago.
1. Improve Your Credit
The first step you’ll take to secure a loan in Chicago is getting your credit score as high as possible. A score of about 620 is the recommended minimum, but with a higher score (700 and above), you will qualify more easily and get lower interest rates. A higher score can also help you get more financing so that you won’t have to come up with a high down payment.
2. Increase Your Savings
You will also have a better chance of securing a loan in Chicago if you have a good amount of savings. The reason is that there a lot more costs and expenses than just the purchase price of the house – for example, property taxes and private mortgage insurance. And if you can show the lender that you have the wherewithal to cover these costs, they’ll be far more likely to loan you the money you need.
3. Know What You Can Actually Afford
This sounds obvious, but many people neglect to consider it. If you know exactly how much house you can afford when approaching your lender, you will, in their eyes, seem like a much better risk. There are many calculators available for this purpose, but the general rule of thumb is that your home should cost no more than 2.5 times your annual income.
4. Get Pre-approved
Pre-approval will let you know the range of what a bank will be willing to lend you. It will also show the seller that you’re a serious buyer.
5. Consider All Mortgage Options
When you want to secure a loan in Chicago, keep in mind that you have several options. You’re not limited to just choosing between 15-year and a 30-year mortgage, a fixed rate mortgage and an adjustable rate mortgage. Choosing the option that best fits your unique situation, say, an FHA loan, will improve your odds of getting financing.
6. Be Patient, Then Pounce
You certainly should take plenty of time to shop and find exactly the right home that falls within your price range. Rushing is almost always counterproductive. But since you know what you can afford and you’ve been pre-approved, you should act fast once you’ve found the house you want. That way, neither the lender nor the seller will have time to have second thoughts and back out.
7. Jump Through the Final Hoops
Finally, be aware that there will be a lot of paperwork and a lot of hoops to jump through to secure a loan in Chicago, especially near the end of the process. Your lender will have to have an appraisal and an inspection done before they can officially hand over the cash. And if the appraisal falls short of the sale price or the inspection turns up major problems, you have to negotiate a lower price for the house. A title search will also have to be performed before you can close.
Dealing with banks and other mortgage lenders can be both intimidating and frustrating. But these tips to help you secure a loan in Chicago should move you much closer to your home-owning goal.