There are plenty of things that Illinois has to boast of. From its many different parks displaying its natural beauty to its architectural sites, and from its diverse and booming economy to the quality education its schools have to offer, it’s easy to easy while many individuals and families choose to live here. Some of its best cities include Springfield, Joliet, and Naperville. (Source: Livability.com)
In addition, cost of living in the state is lower than the national average. The biggest component that allows for this is the cheaper price associated with home ownership. (Source: Sperling’s Best Places)
Status of Home Lending in the State
In the whole of the United States, homes have an average value of $195,300. In The Prairie State alone though, home values average at $166,800. This means that in general, the price of real estate here is lower than many of the other states in the country. (Source: Zillow)
However, since most consumers cannot afford to make the entire payment in one go, they take out mortgages instead. Historically, mortgage rate averages were higher in the state than the country, but at the moment, it dropped to a level below what the entire country combined pays for. The standard conforming loan limit of $417,000 that all of the state’s counties implement further indicates real estate affordability here. (Source: SmartAsset)
Fixed-Rate Mortgage 101
Fixed rate mortgages are arguably the most commonly sought-after type of housing loan in Idaho. There are many good reasons why, but the security it offers is what attracts many home owners to apply for it. With this type of mortgage, borrowers don’t have to worry about sudden, exorbitant increases in their monthly payments, since they have the guarantee of locked-in interest rates. In other words, they will keep paying for the same interest rate throughout the life of their loan.
However, since their rates are fixed, they won’t enjoy the rate reduction that adjustable-rate mortgage borrowers enjoy whenever the market performs better.
When Variable-Rate Mortgages are a Better Option
A variable mortgage is often a better option over a fixed-rate one for borrowers who prioritize lower rates in the first few years of having a housing loan under their names. Within a specified time period – usually one, three, or five years – their lenders will charge them interest rates lower than those with fixed-rate loans. Home buyers who can pay off their debts in a shorter length of time or who would only stay in their homes for several years usually opt for this type of housing loan.
Consumers should take note that after the teaser rate expires, it can already adjust, either upwards or downwards, depending on how the market moves. Factors that dictate market movement includes employment rate, stocks, inflation, and foreign markets.
Existing Borrowers: What Refinancing Can Do
For people who already have mortgages, refinancing can help reduce overall expenditures associated with their home loan. There are only certain situations though wherein it makes sense, so borrowers should first determine if it will really benefit them.
A good example of when refinancing is a good idea is when consumers can lower their interest rate by at least one percent. With such a reduction, they can then enjoy lower monthly premiums, which can also shorten the amount of time needed to repay off the entire debt.
Credit Scores and Mortgage Rates
Lenders also consider credit score rating when qualifying applicants and determining their mortgage interest rates. It should go without saying that the higher the score, the better the rates. A really poor score, on the other hand, can already mean really high rates, or worse, application rejection.
This said, home buyers who want to improve their chances both in terms of getting approved and better rates should consider working on their FICO score first. They can also consult state and local government entities for help in securing a housing loan with better terms.
Illinois Housing Development Authority: https://www.ihda.org/
Home Affordable Refinance Program: http://www.harp.gov/
Illinois Hardest Hit Program: https://www.illinoishardesthit.org/