Illinois Mortgages

Mortgages Introduction

There are a number of different sources out there (banks, credit unions, mortgage brokers, Internet services, etc.) and you should compare a few to truly find the one is the best for you. Different Illinois lenders offer different rates, so it helps you to look around. You can use a mortgage broker as well. They can sometimes offer better rates than you can come across yourself, and will assist you in working through your options. Mortgage brokers are paid by the lending institution offering the loan.

Items needed to qualify

IRS W-2 forms

Income tax returns (for the past few years)

Any alimony or child support payments (paid or received)

Bank statements

Pay stubs

Credit report - It is wise to request a copy of your own credit report in order to review prior to lenders do. It's estimated that nearly 80% of credit reports contain errors, so this gives you an option to rectify them prior to you apply for a loan, as well as take initial steps to make your credit score better.

An explanation of points

A point is 1 percent of the loan amount, and lenders can charge from 1 to many points on a loan. Points are paid as part of closing costs. Discount points are prepaid interest; the greater number of points paid at closing, the lower your interest rate will be. Origination points are principally just a fee to cover the lenders cost of making a loan.

Discount points are tax deductible, but origination fees aren't. When choosing between loans with points or no points, consider how much money you've available for closing, and the length of time you plan to own the home. If you don't have a lot of money for closing, a loan with no points will require less money up front. If you plan to live in the home for a long time, a lower interest rate will be better for you ultimately. You can ask the seller to pay the points as part of the purchase agreement; If they consent to paying the points, you still claim the tax deduction.

Credit Reports

Illinois lenders will request a copy of your credit report when your loan application is being considered. This report gives every detail about your financial history, payment records, total debt, and any bankruptcies.

The information on this report is used to determine your credit score or FICO score, a numerical rating of your creditworthiness. Credit scores range from 300 to 900, with the majority of people falling somewhere between 600 and 700. The higher your credit score, the more likely they will offer you good rates and loan terms. Factors affecting your credit score include the number and frequencies of your delinquencies, the length of your credit history, and a review of your credit limits.

Any unused credit card accounts should be closed.

Settle any outstanding accounts, verifying all listed account numbers to make certain they belong to you. Check your loan balances and late payments.

You might be required to explain certain items to lenders.

Pre-qualification and Pre-approval

Pre-qualification is an estimate of the amount of mortgage you can afford. The entire process may take only minutes or a few hours at most, and is typically free. While a pre-qualification is non-binding to the lender (because the information you provide to them has not been verified), it does serve as a good indication to potential sellers of your general creditworthiness. Pre-approval takes pre-qualification to another level. To get pre-approved takes more time. The Illinois lender will contact your employer, your bank and others to authenticate your income, assets, debts and credit history, and then send you a letter stating that your mortgage is approved for a certain amount within a certain timeframe. This process mainly costs a small administrative processing fee that is often refunded at closing.