Chicago Real Estate >>VP-Realty

2. Purchasing Your Home

What you need to know: Before you begin looking, contact a qualified Real Estate Agent in your local area, such as Verena Ferrante. Try to deal only with an agent that works in your area as they are more likely to know where to look based on your criteria. To get in contact with Verena you can fill out a web form that will alert her to your interests. You will begin receiving emails that same day with full color pictures and virtual tours directly from the MLS usually that same day. You can view these listings and even provide feedback to Verena through an intuitive web interface. As new listings come on the market that meet your criteria, you will be the first to get them.

What you need to do:

1. Contact Verena Ferrante and fill out form.
2. Verena will perform a Comparative Market Analysis to see if the home you found is priced according to the current market.
3. Verena will negotiate on your behalf to get you the best possible price. If a price is agreed upon then she will write a contract and take care of all necessary paperwork.
4. Verena will negotiate closing dates and other conditions to meet your needs.
5. Contact a real estate lawyer. Verena will be happy to provide the names of lawyers she has worked with in the past.

3. Secure Financing

What you need to know: After you find the right house, it’s time to secure financing. This step will be much easier and faster if you’ve pre-qualified with Joe Franciso at Interactive Financial Bancorp.

There are many different types of mortgage loan programs, so it’s important that you research the options thoroughly and seek assistance when necessary. As mentioned earlier, you’ll also need to collect personal financial documents to submit along with your application.

What you need to do:

1. Decide which mortgage loan option is right for you. Different loan programs available through Joe can be found at the end of this page.
2. Get a custom mortgage rate and program from Joe. He will take into account your unique needs and customize a loan product to meet your requirements.
3. Fill out a loan application. Again Joe will walk you through the entire process.

4. The Closing

What you need to know: You’ve applied. Now what? Simply put, Joe Francisco takes over. He will evaluate your financial situation and order an appraisal on the property. Once the loan is approved, he’ll send you a Commitment Letter that outlines the terms and conditions of the loan, and Interactive Financial Bancorp will prepare documents for closing.

What you need to do:

1. Sign the commitment letter
2. Attend closing and sign all necessary documents
3. Obtain quotes for home owners insurance

5. Moving In

What you need to know: Ahhh, the culmination of all your efforts, and Joe's, and Verena's. Congratulations on being a home owner. With this new acquisition comes new responsibilities.

What you need to do:

1. Prepare a budget so that you can make your monthly mortgage, utility and insurance payments on time
2. Make your home more energy efficient to save money on utilities
3. Perform routine maintenance in your home
4. If you are still unfamiliar with your new neighborhood, find out where the local police and fire stations and nearest hospitals are
5. Ensure your home is safe by checking door locks, electrical cords and other potentially hazardous items.

Items you will need:
You may be asked for some or all of this documentation during the application process. If you apply online or over the phone, a loan officer will ask you to either fax or mail these documents.

Information And Documentation Checklist

• Income verification
• Pay stubs for the last 30 days
• W-2 forms for the last two years
• Child support/alimony-friend of the court printout or 12 months cancelled checks*
• Awards letter for Social Security, and 1099 for disability income
• When income is derived from rental income, commission, interest, or sources of income other than salary, tax returns may be required
• Sources of funds/down payment
• Original bank statements for the last three months, including savings, checking and investment accounts
• Stock and securities account statements for the last three months
• HUD settlement statement if using funds from the sale of property
• Sale of asset - proof of ownership, proof of sale and proof of funds transfer
• If you are self-employed
• Signed completed tax returns for the past two years, including personal, partnership and corporate if applicable and all schedules
• Business profit and loss statement year-to-date for current year if more than three months have passed since the end of the tax year Current balance sheet
• Payment history
• Cancelled rent or mortgage payment checks for past 12 months, if not available on credit report
• Copy of land contract, if possible
• Child support/alimony
• Additional information, if applicable
• Purchase agreement, including legal property descriptions and any addendum
• Divorce decree
• Explanation of discrepancies in credit

* Child support or alimony income can be used if you received it for the past
12 months and it will continue for at least three years into the loan period.
However, alimony child support or separate maintenance income need not be
included if it is not to be considered as income available to repay the loan.

Choosing a Mortgage Loan

Many variables go into deciding what type of loan is right for you. Among them are the amount of down payment you can afford, how long you plan to stay in your home, term of the loan, interest rate flexibility, and many others.

Conventional Loan

• Minimum of 5% down payment
• Maximum housing debt ratio – 28%
• Maximum total debt ratio – 36%
• Private Mortgage Insurance (PMI) required if down payment is less than 20%
• Two months payment reserves are required \

Fixed Rate Mortgages

• The interest rate and monthly payment remains the same through the entire life of the loan
• Terms of 10, 15, 20 and 30 years are available

Adjustable Rate Mortgage (ARM)

• ARMs usually offer a lower initial interest rate and payment, so borrowers may qualify for a higher mortgage amount.
• The interest rate and payment may change at predetermined times, depending on an index and current interest rates at the time of adjustment.
• Adjustment periods vary depending on which ARM product you choose. One-year ARMs adjust each year. Other choices include 3/1, 5/1 and 7/1 ARMs, where the initial adjustment will not occur until some years have passed. Example: A 3/1 ARM adjustment occurs after three years have passed and adjusts every year thereafter.
• The caps on the interest rate limit how high (or low) the rate can go up (or down) to protect you from unexpected changes in the interest rate at adjustment periods and over the life of the loan. Typically, caps are 2% and 6%.

Piggyback Mortgages

• This program eliminates the need for Private Mortgage Insurance (PMI) by allowing the borrower to access the equity in their new home for their down payment.
• Reduces the overall monthly payment and out-of-pocket closing costs
• Accumulates equity in the home faster
• Interest paid may be 100% tax deductible
• Can purchase larger/higher-priced homes while avoiding jumbo rates
• No early termination fee
• Saves cash for new home necessities

Baloon Mortgages

• Balloon mortgages typically offer a lower initial interest rate, so borrowers may qualify for a higher mortgage amount.
• This initial interest rate and payment remain fixed for a certain period of time, often three, five or seven years.
• At the end of the initial period, the remaining balance is due and payable. The borrower may then pay off the loan or refinance into another loan program.

Construction and Construction/Permanent Loans

• Loan programs are available to assist borrowers who would like to build a new home or just purchase a lot to build a home on later. Construction only options are available, as well as a combination construction/permanent option that features a single closing.

Jumbo Loans

• This type of loan is used when the loan amount exceeds FNMA and FHLMC guidelines. The current guideline is $ 359,700.00.

Government Loans

• Not limited to first-time homebuyers
• Terms offered are 15 and 30 years
• Gift Funds can be used for down payment
• No payment reserves are required
• Maximum debt ratio is 41%
• Loans are assumable
• Loan amounts are limited

FHA Loans

• The Federal Housing Administration (FHA), established in 1934, is the oldest and largest insurer of residential mortgage loans that offer low down payment loans for qualified borrowers.
• Fixed and adjustable rate options are available
• Minimum 3% cash investment
• Gifts, loans or grants from acceptable sources may be used for down payment and closing costs
• Maximum housing debt ratio – 29%
• Maximum total debt ratio – 41%
• No payment reserves are required at closing
• Maximum (no minimum) loan limits

VA Loans

• The Department of Veteran Affairs guarantees these no down payment loans for qualified veterans.
• Fixed rate loans
• 15 and 30 year terms
• No down payment is required
• Gifts, loans or grants from acceptable sources may be used for down payment and closing costs
• Use of residual income calculation instead of debt ratios
• No Private Mortgage Insurance required. VA funding fee instead.
• Maximum loan limits of $203,000

Affordable Housing Programs

• These special programs offer many advantages to eligible buyers, such as lower down payments, lower closing costs, higher debt ratios and more. There may be income, purchase price or loan limits for some programs.
• Government programs such as FHA and VA are also available under this area because they both provide financing for low and moderate income homebuyers who represent a good credit risk, and who might not qualify for home financing based on traditional lending criteria.
• Conventional programs offered by Federal National Mortgage Association (FNMA) are done using the Community Homebuyer Program title. Federal Home Loan Mortgage Corporation (FHLMC) is also a strong provider of low-to-moderate income based loan programs aimed at first-time homebuyers.
• Other programs offered in communities sponsored by community groups and non-profit organizations, in addition to local and state governments, are also available. It pays to do your homework to better understand the many varied mortgage loan programs.