Tag Archives: down payment

Mistakes on a Plane (or, When Pigs Fly)

Some travel errors could have a far bigger effect on your life than this movie ever did.(image via Wikipedia!)

Some travel errors could have a far bigger effect on your home purchase than this movie ever did.
(image via Wikipedia!)

So as my regular readers know, (Hi Mom! Hi Dad!) I recently took a vacation to California. A splendid time was had by all and I’m feeling nice and refreshed. However, I did have to spend quite a bit of time in airports and on planes, and couldn’t help but notice all of the potential hazards that await a prospective home buyer who’s trying to save for a down payment and get a loan. Since I know a lot of you will soon be traveling through the holidays, I figured a few warnings might be of use so that you don’t return from your trip to a nasty surprise.

Protect your savings (more…)

Pig Latin: Confusing Chicago Regional Real Estate Terms

We Real Estate folk talk pretty funny sometimes. Here’s some terms that are often confused, even by supposed “professionals.” Today I’m going to be discussing how they should be used within the Chicago regional real estate market. I’ll also give some warnings as to how the terms are misused by certain real estate practitioners who don’t know their stuff.

Deposit vs Fee. A deposit is basically collateral. It’s held for a specified time period and returned to you if you behave yourself. A fee, on the other hand, is never refunded. I have unfortunately seen terms such as “non-refundable deposit” get tossed around, which is just outright incorrect.

Deposit vs. Down Payment. For first time renters, it’s easy to get these two terms confused. For rentals you put down a security deposit. For new home purchases you put in a down payment. I’ve heard many prospective renters ask me how much of a down payment is required by the landlord. While it’s pretty easy for me to translate in my head, those renters immediately give away their lack of experience in the market.

Eaves, Fascia, Soffits, Gutters and Downspouts. The eaves are the part of a roof that stick out from the side of the building. The roof will have a certain amount of thickness to it, meaning that it doesn’t meet up with the wall in a perfect point. The fascia spans the gap between the roof and the wall like a bandage. If your roof protrudes substantially from the side of your house, you will have a soffit underneath the overhang. This is another “bandage” to cover the gap underneath the roof. A gutter is a semicircular tube that runs along the point of an eave furthest from the building where the roof and the fascia meet. Water collects in the gutters and runs through them to a central drainage point. Connected to that drainage point is a downspout, a vertical tube that runs down the side of the building.

From renovationexperts.com. You’re welcome.

Scavenger. When you’re looking at a real estate listing in Chicago, “Scavenger” is the term used to refer to trash collection. As a general rule of thumb you will not have to pay for trash pickup if you’re renting in Chicago. If you’re a homeowner in a building with fewer than seven units the city will provide pickup, covered by taxpayer funds. If you’re owning in a larger building your trash collection will be outsourced to a third-party hauler. The cost will be included in your assessments. Some new Chicagoans will interpret “scavenger” to mean pest control. Don’t confuse the two terms.

School District vs. School Attendance Boundary. The entirety of the Chicago public school system is referred to in state terms as “District #299.” You heard right. Every public school student in Chicago is in the same district. However, some of the schools have geographic attendance boundaries. If you live within those boundaries, your children will be expected to attend the designated neighborhood school. However, in many cases you can opt to send your child to a different nearby school, a magnet, or a charter.

Ceci n'est pas un ranch.

It’s a penthouse! It’s a garden unit! It’s all of the above!

Penthouse. In television lingo a “penthouse” refers to a single unit protruding from the roof of a skyscraper. They’re usually large and luxurious, and possibly the only unit on that particular level. Chicago uses the term more generically. A penthouse in Chicago real estate refers to any top floor property in a multi-unit building.

Rehab vs. Renovation. There was a time when “rehabbing” a property meant a whole-hog, full-on repurposing of a failing structure. Rooms were moved around, entire sections of wall were replaced. Renovation, on the other hand, took a property in decent but dated condition and freshened it up with new finishes and modern amenities. The two terms are now used interchangeably. If you see that a property was “recently rehabbed” it could mean something as basic as replacing the carpet in a couple of rooms.

We’ll call it the Amy Wine House.(Too soon?)

Dining Room. I’ve discussed my issues with counting rooms before, so I won’t dwell on this. It will suffice to say that with “combo” dining rooms a viable option in real estate listings, all a “dining room” signifies is that a real estate agent thinks you’ll be able to fit a 6 person table in some corner of another room.

Deck vs. Porch. In Chicago, those wooden (sometimes metal) structures attached to the back of buildings as fire escapes are called porches. If it’s attached and stacked in multiple levels up the back of a building, it’s a porch. If it’s freestanding and uncovered, it’s a deck.

Any Questions?

Township. When you’re looking at a Chicago real estate listing you’ll see mention of a “township.” Many home seekers get confused and think that this refers to the neighborhood of the property. Chicago only has eight townships. They’re relics from the old days before Chicago was quite so large, and basically delineate the different towns that Chicago swallowed as it grew. There are eight townships: Rogers Park, Jefferson, Lake View, North, West, Lake, South and Hyde Park.
These days township boundaries are only used by Cook County for dividing up property tax appeal deadlines. So, if you’re looking in Edgewater don’t be surprised to see that your property is listed in Rogers Park Township.


Do you have any terms that confuse you from the Chicago housing market? Let me know and I’ll try to cover them in another installment of Pig Latin.

The StrawStickStone Mortgage Scenario Analysis Calculator

This is my new favorite entry EVER.

Let's Play!

I've spent the past week explaining why it's so important to do serious comparison shopping and saving up before you apply for a loan. On Monday we investigated how you could save up to 35% over the life of your loan by working with discount points and down payments. On Wednesday I used a salad dressing analogy to explain APR and how it affects your bottom line. For today I've gone back to my nerdy coding roots and have made a pretty hefty calculator so you can play with the numbers yourself.

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How to Save 35% on the Total Cost of Your Home

Stand back, all my darling practical piggies, because I’m going to do math for you again and it’s going to be fabulous.

Today’s delicious math is performed with the end goal of explaining why you really do need to shop around for your mortgage, and why you need to do so before you start shopping for a home with a Realtor.

See, if you’re buying a home and I’m representing you, my job is to negotiate the lowest possible price. We Realtors do pretty well at the whole negotiation thing. According to MRED’s MLS, the final sale prices of homes in Chicago over the past year have been about 10% less than their final list prices. 10% is nice. I got 25% off for one of my buyers this year and felt pretty darned pleased with myself for doing so, but it was a special & extreme circumstance.

But the true cost of a home isn’t just the purchase price. What about the closing costs and interest payments that you’ll rack up over the life of your loan? Unless you’re paying cash only, you’re going to be paying out quite a bit more for the privilege of borrowing someone else’s money. I do everything I can to get you the lowest purchase price, but how much you actually pay? That’s up to you.

By planning ahead, saving a good down payment and working the details of your mortgage you could save 9% on the total money spent after just 5 years in your home. By year 10 that savings is up to 21%. If you stayed in the home for the full life of the loan you would save 35%. That’s more than you’d save in any sort of negotiations over the actual purchase price, and definitely more than the piddly 2.5 to 3% you’d purportedly save on just the purchase price by going without an agent at all. (more…)

What the !%@#$ are closing costs?

Confused stick figure and humorous breakdown of closing costs

It's only scary because it's vague.

Closing costs. The term can strike terror into the hearts of most first time buyers. Leave it to the real estate industry to come up with a special snowflake term for something the rest of the world understands as “sales tax.” Admittedly there’s more components involved than your standard skimmed bit off the top taken by the government every time you make a purchase. (Unless you live in New Hampshire, Delaware, Montana, Oregon or Alaska.) Legally we can’t call it “sales tax.” But for homeowners who are already making a big plunge here, it’s probably easier to think of closing costs in the same manner as sales tax and plan accordingly.

In Chicago these days, provided you’re taking out a loan of less than $417,000, for closing costs you’ll want to plan on needing about 3-4% of purchase price, in addition to your down payment and your loan, in order to buy a piece of property. If your lender chooses, they may require you to pay “points” to decrease your mortgage interest rate – in this case, add one percentage point for each “point.” Some lenders will charge less, some more, but on the average it will be between 3-4%. If you have reasonable credit and it looks like your lender is charging more than 4% on the good faith estimate, go find a new lender!

Despite the government requirement of reasonably accurate Good Faith Estimates from lenders, the actual cost to close will not be revealed to you until the day before you actually close, on a form called the HUD-1. Therefore, for the majority of the purchase process you will need to be carrying that number in your head.  Don’t forget about it and add the amount to your down payment. Don’t leave it tied up in non-liquid accounts until the last minute, either. Bits of it will be dribbling out from the day you get a signed contract to the day you receive the keys. (more…)