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Now that the housing market is finally calming down after the pandemic, buyers are facing a new challenge: Soaring mortgage rates.
In Illinois, the average 30-year fixed mortgage rate is 5.57% — up from 2021's historic lows. This raises the average monthly mortgage payment to $1,224 (assuming a 20% down payment at the median home value).
But buying a home in Illinois is still possible, even for first-time home buyers. Many markets are seeing frequent price drops and fewer offers, giving motivated buyers the upper hand in negotiating for the best price.
In this guide, you’ll learn how to buy a house in Illinois with confidence no matter what the market brings. Learn why you can trust our advice.
Whether you're actively house hunting or just starting to browse homes on Zillow, it's never too early to find a great local realtor to guide you on your search. An experienced agent can help you navigate a tricky housing market, explore your financial options, and negotiate the best deal possible.
Best of all, hiring a real estate agent comes at no extra cost to you — since the seller typically pays both their listing agent and your buyer's agent.
Ready to find a great local realtor, but not sure where to start? The best (and easiest!) option is to try a free agent matching service like Clever Real Estate. Answer a few simple questions about your home buying goals, and Clever will match you with hand-picked agents from Keller Williams, RE/MAX, and other top brokerages in your area. Find a top local agent and make your home buying dreams a reality today!
Step 1: Save for a down payment
🔑 Key takeaway:
Your down payment can be less than 20% of the purchase price — $53,477 for the typical home in Illinois — but you'll have to purchase mortgage insurance and pay more interest over the life of your loan.
Your down payment is the first part of your home's purchase price that you pay at closing. Your mortgage lender will pay the remaining balance.
Typically, mortgage lenders in Illinois want you to contribute 20% of the purchase price as a down payment. That would be $53,477 for a $267,383 home — the typical home value in Illinois.
However, you have options to lower your down payment amount.
Government backed loans, like VA and FHA loans, allow you to contribute 0% and 3.5% of your home's purchase price respectively. Even conventional loans allow for down payments as low as 3-5% (though the minimum varies by lender).
Minimum down payment (%)
Down payment ($)
Based on typical home values from Zillow (August 2022)
But making a down payment of less than 20% comes with some risks.
First, because you're borrowing more money, you'll have a higher monthly payment and pay more in interest over the life of your loan.
Based on home values from Zillow (August 2022) and a 5.57% interest rate for a 30-year loan.
Second, you may have to purchase mortgage insurance.
Conventional loans require private mortgage insurance (PMI) until your loan balance reaches 80% of the purchase price. FHA loans, on the other hand, require a mortgage insurance premium (MIP) for the life of your loans.
Mortgage insurance costs around 1% of your mortgage balance annually. However, rates vary based on your down payment and credit score. Typically, your mortgage insurance payment is added to your mortgage payment each month.
VA loans don't charge mortgage insurance. Instead, you'll pay a VA loan funding fee at closing, which can range from 1.4% to 3.6% of the purchase price.
» READ MORE: Everything you need to know about low-income home loans
Illinois down payment assistance programs
Down payment assistance programs exist to help people just like you! In Illinois, there are several programs available for first-time and low-income buyers. Eligibility requirements vary, so make sure to review the criteria before filling out an application.
To help you get started, here are a few good resources to check out:
IHDA Access Forgivable
The Illinois Housing Development Authority (IHDA) has three DPA programs available for borrowers with an IHDA first mortgage. The Access Forgivable program is provided as a 30-year fixed mortgage that offers 4% of the purchase price (or up to $6,000) as a second loan.
The Access Forgivable program is available to first-time and repeat homebuyers. Eligible borrowers must have a credit score of at least 640 and contribute $1,000 or 1% of the purchase price towards the down payment. Income limits and home price limits can be found here.
IDHA Access Deferred
The IDHA Access Deferred program offers 5% of the purchase price (up to $7,500) as a deferred loan. It's a 30-year, 0% interest second mortgage to be paid at maturity or when the house is sold or refinanced.
The program is available to both first-time and repeat homebuyers who have credit scores of 640 or higher. Borrowers must contribute $1,000 or 1% of the purchase price towards the down payment. Income limits and home price limits can be found here.
IDHA Access Repayable
The IDHA Access Repayable program offers 10% of the purchase price or up to $10,000 as a second loan. It's a 10-year 0% interest second mortgage that's to be paid monthly, and it's available for first-time or repeat homebuyers.
Eligible participants must have credit scores of 640 or above and contribute $1,000 or 1% of the purchase price towards the down payment. Income limits and home price limits also apply, which can be found here.
U.S. Department of Housing and Urban Development
HUD has a list of additional Illinois homebuyer programs here.
Step 2: Find a great real estate agent in Illinois
🔑 Key takeaway:
Interview multiple agents to find one who knows your target neighborhoods, has experience in your price range, and communicates well.
Your real estate agent will be your main ally during the home buying process. Besides finding and showing you properties, your agent will help you make offers, negotiate contracts, and navigate the closing process. Plus, they can recommend other service providers like title companies and inspectors to help you buy your home in Illinois.
Don't rush into choosing an agent. Instead, take the time to research and interview multiple real estate agents who have experience in the neighborhoods you're interested in. You should pay attention to a realtor's:
- Years of experience
- Number of transactions in the last year (the more the better!)
- Experience in your price range
- Overall review score
- Individual reviews and complaints
Step 3: Get preapproved for a mortgage
🔑 Key takeaway:
Once you're preapproved for a mortgage, it's imperative that your financial situation doesn't change. If your credit drops, it can derail the process and keep you from closing on your house.
Here are some easy ways to ensure your credit doesn't change after you receive your preapproval letter:
- Avoid opening new credit accounts
- Don't close any accounts that have been open for a long time
- Make all of your credit card payments on time
» LEARN MORE: What factors do mortgage lenders consider?
A mortgage preapproval letter is an offer to lend you up to a certain amount of money to purchase a home. It shows sellers that you are a serious buyer who is financially qualified to make an offer on a home.
Most sellers in Illinois will require preapproval before showing you their home.
You don't have to decide on one lender right now. In fact, you should compare interest rates and preapproval amounts from several lenders to make sure you're getting the absolute best terms when you buy your Illinois home.
Step 4: Choose the right location
🔑 Key takeaway:
Search for neighborhoods where:
- Home prices are within your price range
- Home values are on the rise
- The local amenities support your lifestyle
Currently, the typical home value in Illinois is $267,383, but don't worry if that doesn't perfectly match your budget. Home prices vary dramatically from city to city and even from neighborhood to neighborhood!
Also, look at past home value trends. This will give you an idea of how much your home's value could go up over the next few years.
To give you an idea of how appreciation could impact what your house is worth in the future, consider these examples from three neighborhoods in Chicago:
Home value appreciation in Chicago
Step 5: Start house hunting in Illinois
🔑 Key takeaway:
Listing prices in Illinois barely increased in the past year, but the drop in inventory may make it a bit more difficult to find your dream home. Let your realtor know exactly what you’re looking for — but manage your expectations, as you may have to settle on a home that won’t check all your boxes. However, if you keep an open mind, you may find a listing that fits your budget and has most of your must-haves.
Searching for homes in Illinois is the fun part of the home buying process! You'll get to look at a variety of homes and discover what you really want in a home.
Make a list of everything you want in a home and prioritize them. At the top of the list should be the items that are most important to you. This will help you separate your "must-haves" from your "nice-to-haves."
Your agent can help you understand if your wants are realistic for your budget and favorite neighborhoods or if you need to rethink what you're looking for.
Look at current housing inventory
The timing of your house hunt in Illinois can have a big impact on your number of options. For example, in Illinois, June has historically seen the most homes for sale. Searching in this season could give you more options and a greater likelihood of finding your dream home.
On the other hand, December gives you the fewest choices in Illinois. Historically, there are 58.4% fewer homes for sale than during Illinois's peak season.
Housing inventory in Illinois by season
New listings per month
Based on data from Realtor.com (October 2022)
Step 6: Make an offer
🔑 Key takeaway:
It’s a tight market in Illinois, as inventory is dwindling, and homes are selling fast. You may have to be aggressive when you find a home, as you will probably face fierce competition. To up your chances of snagging the listing, work out options for contingencies and concessions with your agent ahead of time — that way, you can come up with a strong offer right off the bat.
Once you find a Illinois house you love, it's time to make an offer. Your real estate agent will help you write a compelling offer that gives you the best shot of convincing the homeowner to sell to you.
Currently, in Illinois, homes stay on the market for 59 days before going under contract. However, every market goes through seasonal changes. During busier months, homes get snatched up more quickly than others.
Historically, Illinois homes sell fastest in July, where the average property is only on the market for 48 days. If your home search falls around this time, you should be prepared to move quickly and potentially make offers on several homes before yours is accepted.
On the other hand, if you buy in January, you have a bit more time to search. Homes typically stay on the market 21 days longer than Illinois's annual average.
Average time homes spend on market in Illinois
Based on data from Realtor.com (October 2022)
» LEARN MORE: What should an offer include?
Step 7: Inspections and appraisals
Inspections and appraisals are an opportunity for you to better evaluate the home's condition and value before officially purchasing it. You may have an opportunity after this step to renegotiate the terms of your contract with the seller if something unexpected pops up.
🔑 Key takeaway:
- Inspections: A licensed professional checks the house for any unseen, unexpected, or potential issues.
- Appraisals: An appraiser hired by your lender examines the house to determine how much it's worth.
Home inspections in Illinois
Having your Illinois home inspected by a licensed inspector gives you peace of mind about the condition of the property before you commit thousands of dollars to purchase it.
Your inspector should check out the following parts of the property:
- Electrical system
- HVAC system
If the home has a septic system, you should also pay for a septic inspection to make sure it doesn't have any problems that wouldn't be covered in a typical home inspection.
Illinois requires sellers to disclose known issues with a property, but it’s still a good idea for buyers to thoroughly inspect a home before closing. In addition to a general home inspection, here are some highly recommended tests that you should do before purchasing:
- Radon testing: Radon is a toxic substance that can enter a property without any signs or warnings. If a home's radon levels haven't been tested in the past year, it’s best to have a test done before moving in.
- Termite inspection: Even if your loan doesn't require you to get a termite or pest inspection completed, it's generally a good idea to have one done. Pests can decrease the value of a property or become health hazards, so it's important to find possible infestations quickly.
Appraisals determine the value of the property. If you're using a mortgage to buy your new home, your lender will order an appraisal to make sure the home is worth the money that it's loaning you.
» LEARN: 3 options for buyers after a low appraisal
Step 8: Close on your new home!
🔑 Key takeaway:
Before you close on your new home, you and your agent will do a final walkthrough of the property to ensure that it's still in the expected condition.
To close on your Illinois home, you'll meet at the title company to sign paperwork and settle your closing costs.
It's recommended to read through the required documents before the closing date to make sure all the information is correct. If you come across anything you don't understand, be sure to ask your agent for clarification before signing.
A few common documents and forms you'll need to review will include:
- The mortgage promissory note
- The security instrument
- The deed
- The disclosure statements
After completing the paperwork, you’ll have to pay your closing costs. Your title company will make this easy by collecting the entire amount you owe and disbursing the funds to each party on your behalf.
Homebuyer closing costs can usually be divided into four categories:
- Lender fees: Fees paid to your mortgage lender for originating and underwriting your loan. These fees may cover other expenses related to your loan, such as appraisal and survey fees.
- Title and escrow charges: Charges paid to the title company for conducting the title transfer and facilitating the closing. This expense is usually split between the buyer and seller.
- Prepaid costs: Ongoing costs of homeownership that are paid up front. Some mortgage lenders require buyers to pay for certain expenses up front, such as property taxes and homeowners insurance.
- Other closing costs: Miscellaneous costs that vary according to each buyer's needs. Some common expenses in this category may include flood insurance or real estate attorney fees.
Buyers in Illinois typically pay 3–5% of the purchase price in closing costs. For a $267,400 home — the typical home value in Illinois — that's between $8,022 and $13,370!
Frequently asked questions
Illinois does not require you to hire a real estate attorney to buy a home. However, depending on your circumstances, you might consider hiring one anyways. If you do, treat the process similarly to hiring an agent. Interview multiple attorneys and proceed with the one that best meets your needs.
- Save for down payment
- Get pre-approved for a mortgage
- Choose your preferred Illinois neighborhoods
- Partner with the right real estate agent in Illinois
- Go house hunting
- Make a strong offer
- Inspections and appraisals
- Do a final walkthrough and close
Yes, but the programs aren't restricted to first-time buyers. The Illinois Housing Development Authority can offer eligible buyers a grant of $6,000 or a loan of up to $10,000 for down payment assistance.
To qualify, you must have a credit score of at least 640 and meet the income and purchase limits set for your county. You'll also need to contribute at least $1,000 or 1% of the purchase price (whichever is greater) towards the down payment.
Why trust us?
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Our team of industry-leading researchers are committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.
Federal Reserve. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?." Accessed October 11, 2022. Updated July 08, 2021.
Consumer Protection Financial Bureau. "The Fed is raising interest rates. What does that mean for borrowers and savers?." Accessed October 11, 2022. Updated March 17, 2022.