There are many different types of mortgage loans to choose from when buying a Chicago condo. It’s important to decide whether you want a fixed or adjustable rate mortgage upfront.
Fixed rate mortgages, also known as fixed payment mortgages, are the most common way to finance a Chicago condo. Fixed rate means fixed interest rates for the life of the loan, and also fixed monthly payments. The advantages of this financing option are clear – you will always know how much your mortgage payment will be and you don’t have to worry about the interest rate changing if inflation rises.
You will have the option to choose between a ’30 year fixed rate,’ and a ’15 year fixed rate mortgage.’ This refers to the number of years it will take for you to satisfy the loan with your lender. Both options offer considerable tax benefits, but the 30-year mortgage will take longer to build up equity.
When buying a Chicago condominium, you can also choose to get a flexible rate mortgage, also known as “ARM” or Adjustable Rate Mortgage. This financing option means the interest rate can change, as can your monthly payment amounts. This type of loan is popular during times of high interest rates and rapid inflation. Many condo buyers choose to get an adjustable rate mortgage loan because of the low initial interest rates offered by the lender. However, over time, the rates and payments will likely increase.
If you know anything about the housing market crash, you also know adjustable rate mortgages were the main reason so many people are now without a home and suffering from massive debt. Mortgage lenders were approving millions of people who should not have qualified, thus when the market began to crash and interest rates soared, homeowners were unable to keep up with the huge mortgage payments. Fortunately, this type of predatory lending is no longer taking place, so choosing to get an adjustable rate loan is not much of a risk any longer.
These types of loans, known as guaranteed mortgages, are insured by the government. For those who apply for this financing option, mortgage payments will be much more affordable than a conventional fixed rate or adjustable rate loan.
There is little or no down payment required and the interest rates on the loan are often better than 30-year mortgages. Condo buyers who qualify will have a limit on the amount they can borrow, and to qualify for a VA loan, you must prove current or previous military service. With an FHA loan, you will be required to pay for mortgage insurance as well.
@Properties, Tricia Fox Group
Jean Ward, Broker
212 E Ohio St, 2nd Floor
Chicago, IL 60611