How to prepare personal finance for home mortgage loans in Illinois?
Did you know that interest rates are falling? As a result, the monthly installments for those who have a home loan are steadily falling as a result of the decrease. This seems to be the ideal time to prepare a home loan, is not it? We state as in 5 steps.
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After the irreversible subprime crisis in 2008 – also known as the “mortgage crisis” – the market recovery is not yet absolute, it has been somewhat irregular, but signs of a phoenix reborn from the ashes are already glimpsed.
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Banks are then starting to extend the minimum requirements to apply for a home loan, which, combined with interest rates at historic lows, suggests that it is time to move forward with this major financial commitment and prepare a housing loan.
1. Ready, Set, Go: Build a good track record
For your bank’s risk analysts, credit history is everything. When you needed to buy a pair of prescription glasses with those expensive lenses you had to order, did you liquidate the requested mortgage loan in full and without fail? What about last year’s Christmas shopping you paid with your credit card? Did you leave nothing behind?
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If the answer to these questions is “yes,” then you have nothing to worry about. If you do not have a history of credit payments, it would even be beneficial to start having, as this is well understood by financial institutions and shows that you are a trustworthy customer.
But be careful: you do not get personal or other credits between six and twelve months before preparing a home loan because many recent applications can trigger a red alert and make financial institutions think that you are desperate to have a loan. It is best to build the record in advance.
2. Reduce effort rate
To evaluate the application for credit, banks will always look for the effort rate – that is, they will confront their monthly incomes with the debts they have to pay. This will tell them precisely how you prepared your finances to get a home loan and how comfortably you will be able to afford such a large debt.
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In this sense, calculate your effort rate (know-how here) to find out how much of your income will go to pay for the home of your dreams every month. The lower this indicator, the easier it will be for you.
3. Choose the most appropriate type of house mortgage loan Illinois
Should you choose fixed or variable rate housing loans? At this point in the championship, it is beneficial to contract with a variable, because the interest rates are negative, which means that the monthly installments are lower for the consumer. However, it is not possible to predict when the credit account will increase again and will trigger the monthly payment of the house.
For those who want to prevent the market oscillations, nothing like the flat rate: it is always the same throughout the period – gives more security to the debtor. There are also mixed solutions that combine both modalities: you can set the rate for 10 years, for example, and then the rest of the loan is indexed.
4. Simulate, compare and save when preparing a home loan
Like everything in life, the more informed you are, the better for you. At the start, it is normal to have a preference for the bank with which you have a relationship for many years (where you have an account, cards, etc …). But asking for a home loan should be something well thought out, decided with time and awareness.
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Visit several institutions, ask for several simulations. Throughout this process, take into account not only the monthly installment but also the total amount charged to the consumer (the actual final value of the house, which will be paid after the liquidation of the principal and interest).
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To do so, see how much the bank is charging at the Annual Effective Rate – this is very reliable for comparison because it reflects all commissions charged during the loan, the index and the spread itself. The smaller you are, the more you will save.
Consider also the contractual clauses and the conditions that the banks offer. If you choose a variable rate loan, prepare for a possible monthly increase.
5. Prepare a mortgage loan: negotiate the spread
Most banks will lower the spread if they join other financial products, such as salary domiciliation (receive paycheck automatically on current account), credit cards and savings accounts. Hiring more bank services can be a good method to negotiate with the institution and have a more favorable solution.
Tilling the land of your finances to prepare a housing loan may seem simple (and it is), but it requires time and good decisions – it involves planting and then reaps. Put yourself in the role of financial institution.
When you lend money to a friend or relative, for example, you want to have it back, right? The same applies to banks that provide financing. If you prepare with these devices, there is no doubt that you can.