Obtaining A Home Mortgage

This is Dial Law with information about obtaining a home mortgage in Illinois. It will give you general information about shopping for money to buy a home. If the property is not located in Illinois, we suggest that you contact the county bar association where the home is located.

Banks, savings and loan associations, credit unions and mortgage companies make home mortgage loans. Many lenders also make loans through mortgage brokers. Check your local newspapers for a list of competitive loan rates.

Interest rates and loan charges, often called service charges or points, depend on the availability of money to lend, market conditions and other factors. Before you contact a lender or mortgage broker, you should know approximately how large a down payment and monthly payment you prefer to make. Each lender will tell you its interest rates, loan charges, application fee(and whether such fee is refundable) and other closing costs. The lender also will discuss with you the amount of your loan, the amount of your down payment, the length of time over which you may repay, and the level of monthly payments. You should consider what compromises you may have to make and should shop around for the best combination of down payment, monthly payment, interest rate and repayment period.

In addition to conventional mortgage loans in which you make equal monthly payments, at a constant interest rate, you can apply for or may be offered alternative types of mortgages, known as variable or adjustable rate mortgages. For example, you may be offered a loan with a variable interest rate, or variable monthly payment, or both. Other types of mortgage loans exist in too many forms to review here. You should obtain qualified help in understanding the choices available to you.

If you have been in the U.S. Armed Services, you may want to ask at your lending institution about a loan guaranteed by the Veterans Administration, which is also known as a VA-guaranteed loan.

If you are not eligible for a VA-guaranteed loan, you might look for a loan guaranteed by the Federal Housing Authority, which is also known as a FHA-guaranteed loan. Interest rates on these loans are usually lower than conventional financing and the minimum down payments may be smaller, but other charges may increase the total cost of the loan. However, under certain conditions, lenders may be unwilling to make VA and FHA loans. The lender also will make an appraisal of the property before making a loan to you.

When you apply for a loan, you should take a copy of the real estate purchase contract with you to the lender. To speed up the application process, you should also take copies of recent tax returns, pay stubs and work and pay histories. The appraisal and credit approval process may take several weeks to complete.

When you apply for a loan, the lender will give to you a "Good Faith Estimate of Closing Costs". Upon approval of the loan, you will receive a loan commitment which will terminate on a specified date, often 60 days following the date of the loan commitment. You should make sure that the loan commitment does not expire before the closing date.

At closing, you will sign the note, mortgage and other loan documents and pay all of your loan closing costs. The loan funds will be delivered to the lender's closing agent, which usually is a title company, at closing and disbursed by the closing agent according to the lender's instructions. Title to the property then is verified by the title company to make sure that the mortgage will be a good lien on the property. You must remove any outstanding tax, judgment or other liens against you or the property at the closing to avoid any title problems that could delay your closing.

Buying a home is a major investment. Before you sign any real estate purchase contract, you should make sure that the contract contains a financing contingency, which will make the contract contingent upon your receipt from a lender of an acceptable loan commitment. Of course, you should have the help of a lawyer to make sure that the contract adequately protects your interests.

This general information about the law is not intended as legal advice about any particular problem. If you have questions about obtaining a home mortgage, you should consult a lawyer. If you do not know a lawyer and the property is in the Chicago Metropolitan Area, you can call the Lawyer Referral Service of The Chicago Bar Association at (312) 554-2001 or get an immediate referral on this website. If the property is outside the Chicago Metropolitan Area, contact your local county bar association. The Chicago Bar Association has published a Home Buyer's Manual, which will provide you with detailed information concerning home mortgages and other aspects of purchasing a home. The cost of the Home Buyer's Manual is $5.00 or $7.00 by mail. You can order this manual from The CBA Shop on this website.