United Home Loans

Buying the Home of Your Dreams
The Ins & Outs of an Illinois Mortgage Loan
Posted August 31, 2012

With real estate prices down, buying a home in Illinois remains an affordable option for many Americans. Mortgage interest rates in Illinois are also hovering at or near record lows. Perhaps most important, your fiancé probably won’t want to move into the apartment above your parents garage after you’re married. So, maybe it’s time to consider buying a home of your own.

Once you’ve made that life-changing decision, there are a number of questions you need to answer for yourself before you can start shopping. Perhaps the most important one: How much can you afford to spend on a home?

The Down Payment

When you buy a home you typically pay a portion of the purchase price with a cash down payment and finance the balance with a mortgage. Following the 2008 financial meltdown, most banks increased the minimum down payment they require borrowers to make. While it’s still possible to put down as little as 3% to 5% of the purchase price, those loans are hard to find. Most banks ask for a minimum of 10%. (Some even require 20% down.) So if you want to buy a house that costs $150,000, a 10% down payment means you need $15,000 in cash (plus closing costs, which vary region to region). Then you can finance the remaining $135,000 with an Illinois mortgage from United Home Loans.

Can You Afford a Mortgage in Illinois?

But wait, there’s another calculation you should make before you call a real estate agent. Even if you’ve managed to save the $15,000 down payment, you then have to determine if you earn enough to swing the mortgage payments. While standards vary, most lenders use the 28% rule. That means the monthly cost of the mortgage payment, property taxes and homeowner’s insurance shouldn’t be higher than 28% of your gross income. Let’s see how it works.

You’ve found the home of your dreams, a 3-bedroom and 2 bath split level in a great neighborhood. The purchase price is $150,000. Annual property taxes are $4,000 and homeowner’s insurance adds another $600. You’ve saved $15,000 for the down payment. At 4.5% interest, a 30-year fixed rate mortgage of $135,000 will cost you $684 a month. Add $334 for property taxes and $50 for homeowner’s insurance and the monthly total is $1,068.

Applying the rule that your combined monthly payments shouldn’t exceed 28% of your gross income means you need to earn at least $45,775 annually to qualify for the mortgage. Many lenders take other factors into consideration as well, such as your credit score and how much other debt you have for things like car loans, credit cards and student loans.

Get Preapproved From United Home Loans

In today’s housing market, there are advantages to getting pre-approved for a mortgage in Illinois before you start shopping. It could give you a leg up on other buyers. To get pre-approved for a mortgage in Illinois, contact United Home Loans. We will ask you to submit information about your income and assets. After doing a credit check and a few other procedures, United Home Loans will contact you to outline approximately how much we are willing to lend you.

You will, of course, still have to provide information about the house you want to purchase after you choose it. And the house will have to be appraised. But a pre-approval from United Home Loans can make you a more serious buyer, especially if the seller receives multiple bids for a property.

Be a Sensible Home Buyer                                          

Buying a home today is more affordable than it has been in the last decade. Take a few minutes to make some important calculations so you can shop for a home that matches the resources you have available. If you buy within your means, you should be able to afford to keep living in the home for many years to come.


To learn more about Illinois Home Loans and getting pre-approved to buy your own home, please visit our free "Get A Quote" page to fill out a quick loan application or call us at 708-531-8388.

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