Mortgage Tips

What you need to know about mortgages, where to look, some of the questions to ask.

What to Consider When Looking for a House

Choosing a home can be one of the most difficult decisions you will have to make in your life. This is one of the most significant and expensive things you can buy and there are a great many things to consider during the process. For instance, do you want a house or a condo? On the one hand with a house you can have a yard, and you don’t share walls with anyone. You can do what you would like with the property, it’s all up to you. The down side is that you alone are responsible to make sure the lawn gets mowed, to maintain your landscaping, to make sure the roof is in good repair and your driveway doesn’t crack. With a condo, the condo association takes care of repair and maintenance of the building and green space, but you will have neighbors who share walls with you and you will have to respect the condo associations decisions.

There are many other things to consider as well when looking for a home that fits you. Below we discuss some of the issues you might want to keep in mind and the questions you want to ask yourself as you are looking for that perfect place.

  • Location
    • Neighborhood – What type of neighborhood would you like?

      Each neighborhood in the Chicago area has it’s own flavor, it’s own combination of shopping, nightlife, schools, coffeeshops, etc. (Insert examples here). When choosing the area you want to live in, some of the things you want to ask yourself are: Do I have a family? Do I want a place with lots of other families and children and access to good schools? Or am I single or perhaps don’t have children and like the access to the many activities available in a larger city such as a bustling night life, great restaurants and opportunities to shop. So first analyze yourself and what you want your neighborhood to be like in terms of types of people, age ranges, types of activities that those people engage in, access to the activities you wish to engage in, and how safe you will feel. These affect the character of the neighborhood and will affect how happy you are there.

    • Transportation

      Another major factor in choosing a location is your access to places and activities you can’t walk to. Where do you work? What kind of commute is it going to be from your new home to work. Is there public transportation and do you want to take it? Chicago has many busses and bus routes as well as the L which is a major source of public transportation. It might not be a bad idea to be aware of where these are with respect to your potential home.

      How long will your commute take. If you will be driving to and from work, closer isn’t always better. You may find that if you are close to a major highway like Hwy 90 and it is just a matter of hopping on and off, that it is faster for you than if you lived close but had to deal with busy chicago streets the entire way.

      Don’t forget about other drivers, they have places to be as well. You may find that while work seems like a reasonable distance away, that doesn’t mean you will get to work quickly. Make sure you understand how rush hour is on your potential route to work, and if you can live with it. Ultimately you may want to chose a place that is relatively close to your work and perhaps it is quick ride on the L to get there.

      One final issue this brings up is your car. If you will be driving to work you will need a car, or even if you don’t drive to work, you may still have a car. Will your new home have off-street parking? If not how hard is going to be to find street parking in your neighborhood.

  • Style of Home
    • Condo

      A condominium is a type of home ownership where individual units of a larger complex are sold. If you purchase a unit in a condominium you own everything from the walls of your condo inward. All condo owners in the complex have shared rights to the common areas of the building and main structures (i.e. roof, lawns, elevators, lobby, and stairwells). As such then each of these owners has rights and responsibilities which are usually manage by a condo board. The board makes decisions on such things as roof repair and interior design of the common spaces. Repairs, maintenance etc are paid from from the condo fees collected from each owner.

      With a condo you are not personally responsible for shoveling the walk, mowing the lawn, maintaining the structure or fixing the roof. However, because this responsibilities are all shared by the other owners you don’t have autonomous control either. There can also be issues of privacy as well, as the common areas are available to all and you are generally sharing at least 1 wall. However for many people the convenience of living in a nice place where you are only responsible for the inside of your condo offsets the lack of privacy.

    • Duplex

      A duplex is a single structure which is divided into two residences. Each residence has it’s own driveway, entryway, living areas and even utilities. Each home shares the main structure such as the foundation the roof, usually the siding, the lawn, and one wall. In some cases a complex consisting 3 or 4 units combined in the same way as a the two residences of a duplex are also referred to as a duplex.

      Advantages of a duplex are that you get nearly the same amenities and advantages of a house at a lower cost. The reason for this is the shared features of the structure, so you need to work with the owner of the other 1/2 of the building, and share a wall so there is a little less privacy.

    • Brownstone
    • House

      There are many advantages to owning a house. Privacy and complete control over your property are two of them. However, with that control comes responsibility. You must maintain and repair as needed which can consume considerable amounts of time and effort. In the chicago area there are many neighborhoods with some great home buying opportunities, these include…….(at examples here)

  • Condition of Home
    • Structural
    • Mechanical
    • Fixer Upper or Move In Ready

Glossary of Mortgage Terms

  • Adjustable-Rate Mortgage (ARM)

    A mortgage loan whose interest rate changes based upon the fluctuations in of an assigned index or market indicator.

  • Amortization

    The process of paying off a loan (i.e. a mortgage) by installments. Typical amortization times are 15 and 30 years.

  • Application Fee

    This is part of the closing costs, but is paid to the lender at the time of application. It covers the initial expenses of the lender.

  • Appraisal

    A written estimate of price paid for a property, based primarily on the price of comparable homes in then surrounding area.

  • Assessment

    Assigning a value to a property for the purpose of taxation.

  • Balloon Mortgage

    A mortgage loan, where the remaining principal balance must be paid at a specific time.

  • Broker

    A person with a real estate license. He/she may make real estate transactions for others in exchange for a fee, may operate a real estate business and may employ other brokers and sales associates.

  • Closing

    The final step in the sale of real estate, where the sale and relevant loan are completed by the execution of documents for recording. Sometimes referred to as closing of escrow.

  • Closing Costs

    Amount the buyer must pay at closing. This is in addition to the down payment and may include document preparation fee, title charges, credit report fee, mortgage insurance premium, inspections, appraisals, deed recording fee, prepayments for property taxes, and home owners insurance. The amount of the closing costs are dependent on the financial institution.

  • Collateral

    With a home loan, the property is the collateral. If the loan is not repaid according to the terms of the mortgage, the borrower may have to forfeit the property.

  • Common Areas

    Part of a building and land owned by a condominium homeowner’s association (of which all unit owners are shared owners). Expenses for the operation and maintenance are shared between owners. Common areas generally include hallways, elevators, stairs, lobby, parking lot, green space, pools, tennis courts and other recreational areas.

  • Comparable Sales

    Recent sale price of similar properties in the area. This is one component in determining the market value of a property.

  • Contingency

    A condition the must be satisfied before a contract is legally binding. Examples would include a contingency that the purchases current house sells or that a satisfactory inspection report is obtained for the house from a qualified home inspector.

  • Convertible ARM

    An adjustable-rate mortgage (ARM) where the borrower can change from an ARM to a fixed-rate mortgage if done within a specific time window.

  • Depreciation

    A decline in the value of an item or property.

  • Equity

    Equity is the amount of money a home owner would have left over, if he/she sold their house at fair market value and paid the remaining principal on their home and any other liens against the property.

  • Escrow

    An item of value or money deposited with a third party who will deliver it to another party when certain conditions have been met.

  • Fair Market Value

    The highest price that an interested buyer would pay and the lowest price an interested seller would accept.

  • Home Inspection

    An evaluation of the structural and mechanical condition of a property by a professional. Often a satisfactory home inspection is included by the purchaser as a contingency.

  • Homeowner’s Insurance

    An insurance policy on you home and it’s contents that include personal liability insurance.

  • Lender

    Any person or entity loaning funds. These general term encompasses mortgages.

  • Loan

    An amount of money which is generally repaid with interest.

  • Lock-in

    Where the lender guarantees an interest rate for a certain amount of time at specific cost.

  • Lock-in Period

    A period of time during which the lender guarantees a specific interest rate to a borrower.

  • Mortgage

    A legal document that promises a property to the lender as security for payment of a loan.

  • Pre-Approval

    A term used to mean that a borrower has completed a loan application which is approved by an underwriter, for a certain loan amount. The interest rate used is assumed to be the current interest rate at the time of the actual purpose. Once a property is chosen it must also met the lenders underwriting guidelines.

  • Prime Rate

    The lowest commercial interest rate charged by banks on short-term loans to their most creditworthy customers.

  • Principal

    The amount of the loan or the amount which has yet to be paid.

  • Realtor

    A real estate broker, agent or an associate who holds active membership in a local real estate board which is affiliated with the National Association of Realtors.

  • Title

    A legal document establishing a person’s right to a property.