How Much Can I Afford To Spend On Buying A House In Chicago
If you are living in Chicago and getting ready to buy your first home, you may be asking yourself, how much can I afford to spend? Understanding how much you can afford to pay in a monthly mortgage is only part of the answer. You have to take variables into consideration such as interest rate, taxes and association fees too. Each of these things will change the monthly expenses you will need to cover for your home.
Your first step as a homebuyer is to meet with a qualified mortgage professional to determine how much you can qualify to borrow from a lender. Your credit score and credit history will be checked and your debt to income ratio will be calculated. Once the mortgage broker reviews this information they will give you a mortgage pre-approval letter for how much you can afford to borrow.
The most important thing to consider when buying a home is if you are completely comfortable with the monthly payments associated with what you’ve been approved for. In some cases people are approved for an amount that is greater than they are used to paying in rent and they don’t realize they will have to cut back in other places to afford the new mortgage.
Living in Chicago can be expensive and there is no rule that says you have to look at houses at the top of your budget. In fact, looking at houses for a little less and taking into consideration any repairs you may wish to do is a much smarter approach.
The real answer to the question, “how much can I afford?” is up to you. If you are having difficulty getting approved for a loan because you lack credit or employment history there are some things that you can try:
- Cosigner – When a young person is trying to build their financial profile they sometimes have to look to a cosigner for help. It can take time to build credit and a good way to jump start that is to take out a loan with a cosigner. A cosigner is a person who signs for a loan with you. You are still responsible for making all payments, however if you were to default on the loan your cosigner would be called upon to pay. Cosigners will typically only sign with someone they really trust so it may help to show them your financial plan and how you expect to be able to pay back the loan.
- Apply for less – If you’ve set your sights on a price point that you’re having difficulty getting approved for apply for less. If a lender won’t approve you for the loan amount you want, it’s probably more than you can comfortably afford.
- Hold off – There are times in the economy where lending practices might be more conservative than at other times. If you are having difficulty obtaining loan approval your best decision might be to wait and try again at a later date. While you are waiting, use the time to pay off debts and increase your credit score which will also help you improve your chances of being approved for the loan.
- Ask a lender to reconsider – If your loan has been rejected and you firmly believe you should have been approved you can ask the lender to give your application to someone else in the company for a second opinion. If you believe your loan was rejected due to a factor like a past credit blemish you should include a letter with all fact supporting your claim that you can afford the responsibility of the loan. Explaining the circumstances of the situation and proving it was a one time incident could be enough to get your loan approved.
- Shop lenders – If your loan application is on the cusp of approval and gets rejected you can shop the loan to another lender in hopes of getting approved. However, if your loan is turned down again for the same reasons you should switch your focus to improving your financial standing.
There are a lot of benefits to living in Chicago and being a homeowner. Just take your time during the loan process and make sure you’re not getting in over your head. For more information on interest rates, mortgages, and other house buying factors have a look around Chicago Mortgage Spot.