This year is already full of good thoughts and positive vibes for the Illinois real estate market – especially for buyers. We love that, and if you have questions about how the title and closing process works, the Wheatland Title team certainly has answers. But this piece focuses more on the beginning of the journey and covers the mortgage basics every prospective homebuyer should know.
You don’t need a large down payment. You may have heard that 20% down is required to buy a home, but it’s not. Conventional and FHA loans have a requirement of 3 and 3.5%, respectively, and the median down payment for first-time buyers is 8%.
Pre-approval is key. It’s important to get pre-approved for a mortgage in any market, but it’s especially paramount now as interest rates fluctuate and competition increases. Doing so will help you understand how much you can afford, save time down the road and make any offers you make more attractive to sellers.
Private Mortgage Insurance (PMI) is often worth it. Helping perpetuate the 20% myth is the notion that PMI should be avoided at all costs. That’s also not true. Just consider this quote from Realtor.com, and remember to discuss your options regarding PMI with your lender. “PMI has a negative connotation, but it’s not the worst thing in the world.”
So, what is Private Mortgage Insurance then? We’re glad you asked!
While it’s an added fee of anywhere from 0.3 to 1.15% of your home’s loan, it’s a sensible tradeoff for most people who don’t want to or can’t put a large payment down. Think of it more as a flexibility fee than a penalty in most cases.
A 30-year mortgage isn’t your only option. When it comes to home loans, there’s no one-size-fits-all solution. While most mortgages are for 30 years and have a fixed rate, that may not be the best option for you. You could look into taking out a 15-year loan or think about an adjustable-rate mortgage (which also has an undeserved negative reputation these days).
If you need additional assistance, reach out to your most trusted member of the Wheatland Title Family of Companies. If we don’t have the answers, we’ll certainly connect you with one of our trusted loan officer friends for help. We’re all here to help you get to the finish line.
