The median listing price in Chicago is $319,998, which is 16 percent higher than the national median listing price of $275,000. The city’s Zillow home value index of $228,600, however, is only 4 percent higher than the national figure of $220,100.
Home values in the city have climbed roughly 13 percent in the last three years and are projected to increase another 6 percent over the next year as Chicago’s real estate market continues to recover from a low point in 2012.
Mortgage Rates in Chicago
According to Zillow, the housing market in Chicago is currently considered “less healthy.” The online real estate database also rated the Windy City as “cool,” which is not a comment on its hipness or breezy weather, but rather an indication of its low market temperature, which currently favors buyers.
If you are looking to take advantage of relatively good home prices in Chicago, it is important to remember that the area’s mortgage and refinancing rates are impacted by national interest rates as well as local economies. Factors such as state and city laws, foreclosure rates, and competition among lenders all play a part.
For example, increased competition among lenders drives down rates, and according to the U.S. Bureau of Labor Statistics, Chicago has one of the highest concentrations of lenders of any American city.
In addition to these factors, there are also myriad other data points that affect mortgage and refinancing rates for individuals. We will explore more of them in this article on getting the best mortgage rates in Chicago.
Elements That Affect Mortgage Rate & Refinance Rates in Chicago
Mortgage and refinancing rates in Chicago are determined by a variety of factors.
Understanding these components can mean the difference between saving and spending thousands over the life of the loan.
Your credit score is typically the most instrumental factor in deciding whether you qualify for a home mortgage loan and, if so, which rates you’ll be eligible for. Though different lenders have different requirements, a conventional loan generally requires a FICO score of at least 620. The higher the credit score the lower your mortgage rates, as good credit typically reflects a reliable payment history. Conversely, lower credit scores often lead to higher rates, or no loan at all, although it is possible to get a mortgage with bad credit.
In most cases, there is an inverse relationship between the size of your down payment and the rate of your mortgage. A larger down payment produces a lower interest rate since buyers with more stake in the property are viewed as lower risk. Conversely, a small down payment often comes with higher rates. A good rule of thumb is that putting at least 20 percent down is a good start, though the more you can afford to put down upfront, the less you will have to pay off over the loan term. For this reason, low or no money down offers are not always wise investments.
The duration of your loan is another key determinant when it comes to mortgage rates, with shorter-term loans typically carrying lower interest rates but higher monthly payments. In contrast, longer loan terms involve lower payments spread out over a longer period, albeit with higher interest rates. Fixed-rate mortgages can come with loan terms ranging anywhere from 10 to 40 years in total.
Type of Refinance
If rates go down during the term of your loan, you can sometimes take advantage of improved conditions by refinancing. However, you should familiarize yourself with the various types of refinancing options beforehand. The rate-and-term refinance, which—according to Zillow—is the most popular refinancing choice, allows borrowers to lower their rates or change their loan types. Other types include cash-out refinance, cash-in refinance, short refinance, and the Home Affordable Refinance Program.
Best Mortgage & Refinancing Rates in Chicago
With its relatively weak housing market, buyers are currently poised to make a killing in Chicago. They can also save even more if they shop around to find the best mortgage rates and refinancing options the city has to offer.
Failing to compare quotes from different lenders can cost borrowers tens of thousands of dollars over the term of their mortgage. Follow these steps if you want to take advantage of the healthy competition in America’s third-largest city:
- Study up on different mortgage and refinance types: Your rate can change quite a bit depending on the exact mortgage or refinance option you choose. On the other hand, the lowest rate may not necessarily be the most sensible option for your situation. Different mortgage and refinance options exist because borrowers have unique situations, so consider your current financial abilities and goals when deciding on the type of loan that makes the most sense for you.
- Get quotes from multiple lenders: Savvy shoppers don’t make a purchase until they have compared their options. Reaching out to multiple lenders and speaking with several of the many lenders in Chicago can provide you with multiple quotes to compare. In addition to expanding your list of options, soliciting a variety of quotes can help you negotiate a better deal, as lenders may offer to pay closing costs or eliminate some underwriting fees to win your business.
- Don’t forget to calculate additional costs: A low rate is certainly worth checking out, but shouldn’t be your only consideration when deciding on a mortgage or refinancing option. You should always remember to factor in other terms of the loan and any fees or additional costs that will affect the overall total. Speak with your lender about any potential broker fees, underwriting costs, prepayment penalties or closing costs, and be sure you have received a Loan Estimate and Closing Disclosure form within a few days of when you submit your loan application.
Recommended Mortgage Companies in Chicago
Chicago has a solid mixture of national and local lenders for borrowers to choose from. In fact, the wealth of options can prove overwhelming to some. Fortunately, there are some especially noteworthy providers worth spotlighting:
- Quicken Loans: This national lender is our No. 1 choice because of its 90-Day Rateshield™ benefit, which locks in your rate and keeps it from going up for 90 days.
- Better Mortgage: This relatively recent entrant to the lending industry provides a completely digital experience and lives up to its name by charging no origination fees, commissions or hidden fees.
- Guaranteed Rate: The namesake of the city’s south side Major League Baseball stadium, Guaranteed Rate is one of the best lenders for government loans, including VA, FHA, and USDA loans.
- CrossCountry: Founded in the Midwest and available nationwide, CrossCountry is an online lender that offers a comprehensive set of loan options, as well as a wide selection of refinancing programs.
These are only a few of the banks and lenders out there. If they don’t work, we can help you continue your search.