Chicago Mortgages: FHA, Conventional, Renovation, and More

There are many types of Chicago mortgages. Which one is best for you depends on many factors. Getting the best one for you has significant consequences.

Mortgage loans are created to fit different borrower situations yet not cross a certain risk level.  Lenders don’t have the same risk level, however, all of them have a strong aversion to risk.

What does that mean for borrowers?

That they have options, some better than others but none where they don’t pay a good amount of money for the loan.

(A little aside: people in the Chicago area use the words mortgage and mortgages to mean mortgage loan(s).  The mortgage part of mortgage loan is the borrowers’ promise to repay the loan.  But, since people around here use the words the way they do, I’ll use them the same way, you’ll see mortgage and mortgages when I should be using mortgage loan or loans.)

If you’re interested in getting a mortgage and don’t care about the many ways lenders look at them, call me now at 847-840-8884 to get started.

The Different Chicago Mortgages

Mortgage loans can be divided by the property used as collateral, by the type of amortization, by the number of years borrowers have to re-pay them, by intended use.

Mortgage Loans by Collateral

Most people don’t give it much thought, but lenders don’t divide loans just by the property use, just into: residential and commercial loans.  They divide them within those categories.

Residential Mortgages

Single family residences are “treated better” than 2-4 unit buildings or condominiums.  For the simple reason that they involve less risk.  That difference translates into either higher interest rates or a more difficult application process.

And, if you think about it, it makes sense.

When they lend against a 2-4 unit building, they not only lend against the property but against the property and the ability of the home owner to find good enough tenants (tenants that pay on time and don’t do too much damage).

When they lend against a condo unit, they lend against that unit and the common elements and the association’s skills at managing a condo project and the upstairs neighbor not letting his tub overflow and the next door neighbor not setting their unit on fire and all sort of other such things.

Mixed-use, 2-4 properties can go either way: residential or commercial.

If you’re interested in getting a mortgage loan against a residential property, call 847-840-8884 now.

Commercial Mortgages

For lenders, a 10-unit apartment building is a different animal than a 10-unit office building.  And a church is way different than a gas station, a gas station than an apartment building, and apartment building than a warehouse.

Their attitude is expressed in the interest rate and terms they offer or in their attitude: we don’t lend against that kind of property.

If you’re interested in a commercial loan, call 847-840-8884 now to see what I can do for you.

Mortgage Loans by Type of Amortization

Loans can have a fixed or adjustable interest rate.  The amortization can be the same.

The most common amortization on the residential side is 30 years.  Less common but common enough are the 15 and 10-year mortgages.  Recently, lenders have started offering any kind of amortization, like 18 or 23 year amortization.  But they treat them like the closest of the more common amortizations, 18 is treated like 20; 23 is treated like 25.

The common adjustable rate mortgages (ARM’s) are 5/1 and 7/1. 3/1 and 10/1 also exist.  On the residential side, they’re amortized over 30 years.  That is, the payment is calculated as if the loan was a fixed, 30-year loan.

Want to know what type of loan you qualify for?  Give me a call at 847-840-8884 now and find out.

Mortgages by Use of Property

Commercial properties that are used by the owner to run the owner’s business are treated differently than commercial properties that are leased to businesses the owner doesn’t control.

Residential properties can be used as a borrower’s primary residence or as an investment, so they’d get either a residential mortgage or an investment property mortgage.

Residential mortgages come into two flavors: for principal residences or for second homes.

The property can be a single family house, a townhouse, a condo unit or a 2-4 unit building, it doesn’t matter.  The only thing that matters is where the owner lives most of the year.

The big differences:

  1. primary residences and second homes have lower interest rates than investment mortgages
  2. the down payment required for investment properties is 20%; for residential it can be as low as 3%.

Want to know what kind of terms you can get for your primary residence? Second home? Investment property?  Call me now at 847-840-8884 to find out.