When we hear the word “mortgage,” many people think there’s just one, 30-year fixed rate type, but there are actually multiple types of mortgages and all options have both pros and cons. When it comes to property management in Chicago, it’s important to be aware of the mortgage options, so check out some of them below.
Adjustable Rate Mortgage
Also known as ARM, this mortgage idea is that interest rate changes over time throughout the life of a loan, reflecting changes in the economy. One of the more common ARM options is the 5/1 loan where the interest rate remains the same for the first five years of the mortgage and then is free to change for the next 25 years.
A home loan like FHA (Federal Housing Administration) loans are government-backed and help borrowers who have a more modest means of living. It allows low down payments—as low as under 5%—and those who have a low FICO score can use this option. The built-in mortgage insurance protects against the possibility of not being able to repay the loans. Another type of a government-backed mortgage is a VA loan, which makes life easier for U.S. armed forces veterans to buy homes because they don’t require a down payment.
Fixed Mortgage Rate
The conventional fixed rate loans are common because people like their consistency. Throughout the duration of the loan, the monthly payments don’t change and you can get them in different yearly terms. However, the 15-year and 30-year terms are the most common options.
Interest-only requires payments on the lender’s interest charge, meaning the balance will not be reduced during the interest-only payment period. People with a high monthly cash flow or even a rising income can benefit from this option because they are disciplined enough to make the periodic principal payments.
Knowing the mortgage lingo can be helpful when you are ready to purchase your first home and when the time comes, you’ll feel more comfortable, especially if you later decide to go into property management in Chicago. Buying your first home may be daunting, but if you are ready to discuss all the different mortgage times, you are ready to make that first purchase.
If you need help finding a place to live in Chicago, or have more questions regarding any property, give Frontline Real Estate a call at (847)780-8065 today.