The Key to buying Chicago real estate

by Nick Denning.

Plenty of articles are out there discussing why someone should buy Chicago real estate today.  Prices are at all-time lows, there is plenty of inventory, rates are the lowest in 40 years and the housing market has “hit the bottom” are many of the arguments for purchasing a property now verses later or even, if, at all.  There are many schools of thought on each of these topics but no one seems to be addressing the fundamental “key” to buying a property…the money!

When you require financing to purchase a property (as most buyers do) you will be faced with a myriad of obstacles to get you to the closing.  If you are one of the fortunate people who can buy a property with cash, you will have an easier time in the buying process than someone who requires financing.  You can’t drive a car without a license or gas, right?  You can’t buy a Chicago property without the means to afford it and the loan from the bank.  Every day we hear from potential clients who want to purchase a home but have not taken a single step towards the lending process!  No gas, no license, no driving…No cash, no loan, no home purchase!  It’s not 2005 in the lending world, folks.  Back then, it seemed like anyone with a pulse could get a mortgage on a huge house with little or no documentation.  Because the fallout of those “toxic loans”, the lenders are very diligent in their lending processes today.  

The successful process for obtaining financing is broken down into 4 steps:

STEP 1: Be prepared!  Have all of your current paperwork available. 3-2-1 is a good rule of thumb.  Obtain three (3) months of your current bank statements-all pages.  Your bank statement should also show your down payment funds.  Your last two (2) years tax returns (all schedules) will be required.  One (1) month of paystubs for all borrowers, from all jobs.   

STEP 2: Establish a price based on your budget.  Many homeowners got into trouble by “overbuying” homes beyond their means.  Use online mortgage calculators to figure possible payments and establish home values within these price ranges.  You can let the Loan Officer tell you how much you can afford, but they will not tell you how much you should afford-only you can determine that figure based on your budget.  

STEP 3: Be ready for anything!  The current environment for obtaining new loans if fraught with pitfalls.  Anything from extra deposits of cash in your bank accounts, to balances over your month-to-month average will need to be addressed. Based on your credit profile, your lender may require additional down payment funds or your rate could be affected.  If you are purchasing a short sale and the property acceptance process is longer than 60 days (most are), the lender will re-pull your credit and your score may drop causing your loan to no longer be Approved.  The property itself may not meet the lender’s criteria.  With so many distressed properties on the market today, it is important to view each property through the eyes of the lender.

STEP 4: Be patient!  The lending process does not happen overnight.  The average loan processing time from application to closing is 46 days. The steps required to get to the closing are many but with a little patience the process will go much smoother.  A diligent loan officer helps too.  Don’t be afraid to ask questions either!  It’s your money and it will be your home, you deserve to be satisified.

If your uncle is not rich or if you are not holding a winning lottery ticket to purchase the home of your dreams, follow the 4 STEPS to buy that next property.  It may not be the easiest task in the world but it may be the biggest purchase of your life, so treat it with care.

Nick Denning is ta ZipRealty District Director serving Chicago area real estate clients.