This section features information about how much real estate you can afford in Bolingbrook, Frankfort, Lemont, Lockport, Manhattan, Mokena, New Lenox, Orland Park, Romeoville, Woodridge and surrounding Cook, DuPage and Will County IL areas.
Determining how much house you can afford is an important first step in the home buying process. By understanding the price range you can afford, you can save time by looking for real estate in the appropriate areas and really find the ideal home for you. Below you will find steps to help you get a better real estate price point.

Calculating Your Budget
To estimate your budget, add up your total financial worth and then subtract all of the costs included in the purchase.  Some of the expenses involved are:

• Down Payment
• Monthly Costs
• Points
• Loan Fees
• Settlment Charges

For assistance in computing these costs and determining your final budget, contact me.  I have several simple worksheets that we can work through together.

Examine Your Credit Report
In today's economy, credit scores are becoming an important factor when determining whether or not a borrower qualifies for a house.  Employers even check credit scores to help determine the potential responsibility level of a future employee.  Your credit score is very valuable and can be negatively impacted when credit checks are run.  Do not allow multiple credit checks right before you plan to apply for a mortgage!  The higher the credit score, the better the loan program and interest rate.

You can obtain a free copy of your credit report once a year from Equifax, Trans Union, and Experian.  Examine the reports thoroughly and make sure they are accurate.  If there are mistakes, contact the credit report agencies and ask them to remove the mistakes immediately.  If your credit report is tarnished, I can suggest ways for you to repair the damage.

Loan Pre-qualification vs. Pre-approval
One you have your budget and credit report in good shape, it is a great idea to get pre-approved or pre-qualified for a mortgage.

Pre-approval- uses basic information, as well as, electronic credit reporting to determine whether a lender will loan you money.  If you are pre-approved for a mortgage, the lender has given you a committment to support your new purchase. 

Buyers who are pre-approved for a mortgage are more attractive candidates to the seller.  Getting pre-approved lets the seller know you are seriously interested in buying and you have a better chance of getting the property when you make an offer.  See below for documents needed for loan approval.

Pre-qualified- THIS IS NOT A MORTGAGE APPROVAL.  This is an estimate of what you can afford.  When you pre-qualify for a mortgage, the lender also collects basic information, usually over the phone.  Information such as your income, monthly debts, credit history and assets are used to calculate an estimated mortgage amount. 

The lender has not yet committed to supporting your financial needs and, therefore, you have not received an actual gaurantee of funds.  At this point, the lender has not run a credit check or verified any of the information you have provided.

Documents Needed for Loan Approval

• Two most recent pay stubs
• W-2s from past two years
• Federal tax returns for the last two years
• Most recent bank statements
• Long term debt information (credit cards, child support, auto loans, etc.)
  

Debt-to-Income Ratios
A debt-to-income ratio is the percentage of your montly gross income (before taxes) that goes toward monthly debts.  It is a simple guidline used by lenders to show your maximum mortgage amount after all other obligations are met. 

The two main kinds of debt-to-income ratios are expressed as a pair of numbers written in the following format:  28/36.  You may see conventional loan debt limits referred to as the 28/36 qualifying ratio.  These numbers refer to two calculations, the "front ratio" and the "back ratio".

The "front ratio" or the first number, indicates the maximum percentage of monthly gross income that the lender allows for housing costs.  For renters, this is the rent amount.  For homeowners, this is the mortgage principle and intrest, mortgage insurance premium, hazard insurance premium, property taxes, and homeowners' association dues.

The "back ratio" or the second number, indicates the maximum percentage of monthly gross income that the lender allows for paying ALL recurring debt.  This includes all housing expenses covered in the "front ratio" and other debt such as credit card payments, child support, auto loans, and other obligations that will not be paid off within a relatively short period of time (6-10 months).

EXAMPLE:
In order to qualify for a mortgage for which the lender requires a debt-to-income ratio of 28/36:
Yearly Gross Income = $45,000/Divided by 12 = $3,750 per month income.
$3,750 Monthly Income X 0.28 = $1,050 allowed for housing expenses.
$3750 Monthly Income X 0.36 = $1,350 allowed for housing expenses plus recurring debt.

A common guideline used in the U.S. for conventional loans is 28/36.  This guideline is flexible and can change depending on credit and down payment.  Each situation is different and should be reviewed by a professional.  Recent defaults by subprime borrowers have produced a tightening of these limits by most lenders.  Back ratio limits up to 55, common in recent years, will be hard to find even for someone with sterling credit.  In today's financial environment, these requirments change frequently.  It is always a good idea to get pre-approved before you begin home shopping.  Doing this will give you the comfort of knowing exactly what price range fits your budget.  Visit my Real Estate Mortgage Calculators section to compare loans and determine required incomes.

FHA loan ratios are typically 29/41 and VA guidelines do not have a "front ratio" at all, but the guideline for the "back ratio" is 41. 

Getting pre-qualified for a loan can help you determine what you can afford. Things such as your credit history, your income, your outstanding debt, monthly expenses, employment history, the type of mortgage you want, and the amount of savings you have can all have an impact on how much real estate you can afford.  I can help you get pre-qualified for your mortgage.  Please fill out the following information and I can help you determine a good price range.  There is no cost or obligation and your information will be kept strictly confidential.  I understand that this information is personal and I will not distribute it anyone other than my preferred mortgage broker.  Once you fill out the form, I will quickly process your information and get right back to you.