Chicago Mortgage Loan Programs

There are many Chicago mortgage loan programs because Chicago area homeowners have varied needs.

Mortgage loans in Chicago are what they are in the rest of the country: tools.  And that means the clearer you are on your situation and financial goals, the easier it is to choose a loan.

But how often do you need a mortgage loan?

Not as often as other things.  So, you’re probably not constantly reading up on mortgages.

Here’s a brief overview of mortgage loans available to Chicago area home owners. By Chicago area I don’t mean the entire northern quarter of Illinois, so I will not cover USDA loans.  (All other loans available in the rest of the country are available in Cook, Lake, and DuPage, and Will Counties.)

Call 847-840-8884 now if you’d like to know what’s the best option for you.

Chicago MortgageChicago Mortgage Loan Types

First, Chicago mortgage loans can be divided into two broad groups:

  1. loans where a Government entity is involved
  2. loans where there’s no Government involvement.

The reason it matters? Government involvement means lenders are insured against loans.  That means they relax the rules a bit.  That means more people can get a loan.

Government Mortgage Loans in Chicago

There are 2 types of Government loans available to people in the Chicago area:

  1. FHA
  2. VA.

Call 847-840-8884 now if you’d like to know what’s the best option for you.

Chicago FHA Mortgage Loans

HUD (the Department of Housing and Urban Development, the entity running the FHA Program) says FHA loans are for everybody.  In real life, if a borrower has good work and credit history, a large down payment and great income, it doesn’t make sense to go for an FHA loan.

A Chicago FHA Loan Is a Great Financial Tool

But only for people with dinged lives.

By dinged lives I mean people who don’t have a lot of money for the down payment, don’t earn a lot, or have had financial problems (the kind that get pop up on credit reports).

FHA Rules

The FHA insures loans, so lenders relax rules.  The rules/restrictions are many.  That’s the case for every type of loan and the reason you should be talking to a good Chicago loan officer long before you actually need to get that mortgage.

The main ones are:

  1. qualifying ratios are higher (the minimum monthly payments on all your debt can be as high as 55.99% of your gross income).
  2. credit scores can be lower (though most lenders stop at 580, we have lenders that go to 560 or even 500) or not exist (applicants need to have proof that they’ve paid phone, electric or some other such bill for the 12 months prior to applying on time).
  3. employment history (often, Chicagoans who don’t qualify for a conventional home loan due to unemployment do qualify for an FHA loan).

But the loan limits are lower.

FHA Loan Limits for Chicago Area

In the year 2020, the loan limits for Cook, DuPage, Kane, Lake, McHenry and Will Counties are:

1 unit properties   2-unit properties   3-unit properties   4-unit properties
$368,000   $471,000   $569,450   $707,700

If you’re in another county or year, this is the link to where HUD posts the FHA loan limits:

FHA Loan Insurance Premiums

To get an FHA loan, borrowers have to pay 2 insurance premiums:

  1. upfront mortgage insurance premium
  2. monthly insurance premium

Currently, (beginning of 2016), the upfront insurance premium is 1.75% of the loan amount.  It can be rolled into the loan, as long as doing so does not get the loan to exceed the county limit.

The monthly insurance premium is 0.85% / 12 of the loan amount for loan with less than 10% down payments and 0.80% /12 of the loan amount for loans where the down payment is larger than 10% of the purchase price.

Call 847-840-8884 now if you think you might benefit from an FHA loan.

Chicago VA Loans

VA loans are administered by the Department of Veterans Affairs for the benefit of veterans.

Not all people who served in the Army, Navy, Marine Corp qualify.  Can’t have been dishonorably discharged and the applicants must meet service length requirements (shorter for war time than for peace time).

VA Loan Limits

In 2020, the Va removed loan limits for all types of properties.

Chicago VA Loan Advantages

The main advantages are:

  1. easier to qualify for
  2. high LTV’s (loan-to-value).  As a matter of fact, you can borrow the entire purchase price.
  3. assumable.

 Chicago VA Loans Are More Expensive Than Conventional Ones

There’s a one-time funding fee.  It is a percentage of the purchase price.  The exact percentage depends on the  type of military service and down payment amount.

Call 847-840-8884 now if you think you might benefit from a VA loan.

Conventional Chicago Loans

Conventional mortgages can be divided into two broad groups:

  1. conforming loans
  2. non-conforming loans.

 Conforming Chicago Loans

These are all the home loans that meet the rules set up by FHFA (Federal Finance Housing Authority) for Fannie Mae and Freddie Mac.
The main one has to do with loan limits.

In 2020, for Illinois, they are:

1 unit   $510,400
2 units   $653,350
3 units   $789,950
4 units   $981,700

Here’s where you go to find out what they are if you’re interested in other states or checking in another year:

Also, for conforming loans, the total minimum monthly debt payments, including any and all mortgage loans, can’t exceed 45.99% of the applicant’s gross monthly income.  As per the Frank/Dodd law that took effect in 2014, it should be 43%, but it’s not there yet.

Call 847-840-8884 now if you think you might benefit from a conventional loan.

Non-Conforming Chicago Loans

These are all the other loans Chicago homeowners can obtain, from construction to bridge to commercial to anything you can dream on, almost.  Most of the residential mortgage loans in Chicago are done according to Fannie Mae, Freddie Mac or the FHA rules, so there’s a lot of similarities between loans.

There’s no one entity that purchases non-conforming loans, so there is a lot of variety.  If you’re looking or/ need such a loan, feel free to call 847-840-8884 now.

Chicago Mortgage Specialist

Given the amount of information available on the internet, you can do a lot on your own, so why talk to a Chicago mortgage specialist?

The first thing that comes to many people’s mind is that you save time: you get answers faster by asking a person who’s knowledgeable about mortgages.

But the most useful reason is that a mortgage specialist will make sure you weed out incorrect information and connect you with a loan that is a good fit for your situation.

Yes, there’s a lot of information about all types of mortgages on the internet, not all of it is up-to-date and some of it is downright wrong.

There are many loan programs available.  For instance, almost everyone and their grandmother offers FHA mortgages.  But they are backed by investors with different ideas of what risk is.

That translates into many differences.

That means that some people going to Lender A will be turned away but Lender B will be happy to give them an FHA-insured loan at a great rate.

Call 847-840-8884 now if you are looking for a mortgage loan in Illinois.