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Are you considering buying a house in Illinois? House hunting can be one of the most exciting (and stressful) times of your life. You’ll find that Illinois has a lot to offer a homebuyer, including high-end urban apartments in the big city to suburban homes and quaint rural properties. With a diverse economy, affordable housing, renowned universities, great public school systems, and natural beauty, Illinois is a highly sought-after state for homebuyers. The local real estate market saw a 3% increase in sale price and 9% more homes sold.
When buying a house in Illinois, you’ll want to consider such things as location, budget, financing, inspections, and local regulations in your home-buying process. Illinois law is a little bit different in that you'll need a real estate attorney for your transaction. Although this might seem like a lot to keep track of, our guide to buying a house in Illinois makes it easy by putting everything you need to know in one convenient place. Read on!Â
If you’re wondering where to start when buying a house in Illinois, here are some easy steps to follow that will put you on the path to buying your dream house.
Get Your Finances in Order
Buying a house in Illinois is a huge investment, so you'll want to make sure your credit is strong first. FICO scores range from 300 to 850. The higher yours is, the better interest rate you'll qualify for. Even a 0.5% difference in your interest mortgage rate can mean hundreds or thousands of dollars over the life of the loan.
Typically, credit scores between 650-700 will get the average rate. A higher score will generally qualify for at least a 0.25% reduction in interest rate. If your score is below 650, your rate will be higher, Ways to improve your credit score include paying your bills on time, paying off credit cards, not building up debt by living above your means, and maintaining a budget.Â
Get Pre-Approved for a Mortgage
Before contacting a real estate agent and looking for a house, getting pre-approved allows you to see the amount of monthly mortgage payments you can comfortably make. This way, you can avoid the trap some homebuyers can fall into by finding the “perfect” house before realizing they can’t afford it. Sellers are more likely to sell to a buyer who is pre-approved because it shows that you’re less of a risk of the deal falling through before closing. It makes buying a house in Illinois easier.
Make sure you know the difference between getting pre-approved and pre-qualified. Pre-approval means that the lender is prepared to give you a loan after seeing your financial documents. Pre-qualified means that the lender is estimating what you could borrow. It doesn't mean you'll get a loan, and you should also be aware of lender fees.
In the pre-approving process, lenders take into account things such as your income, debts, location, home price, and down payment amount. Note that you’ll also have to add closing costs, property taxes, utility fees, and other monthly expenses into your budget, as well as extra funds for the inevitable home repairs. A good plan is to apply to several lenders within a two-week period so that the inquiries don’t adversely impact your credit report.
Find the Best Mortgage for You
You might think that finding the best mortgage comes after buying a house in Illinois, but the advantage of shopping for a mortgage beforehand lets you know exactly how much you can borrow before buying a house in Illinois. Many homebuyers struggle to pay their mortgage because they bought a home out of their price range.
Your down payment is a big part of buying a home in Illinois. It will determine how much of the home cost you are going to finance. Even if you don’t know exactly what your down payment will be, it’s a good idea to have a ballpark estimate of what you can afford to put down on a home.
When determining if you qualify for a loan in Illinois, lenders typically use the "28 and 36" ratio. It means that no more than 28% of your gross income should be used for housing expenses (including principal and interest on the mortgage, as well as real estate property taxes and homeowners' insurance). When you add in monthly payments on your outstanding debts, the amount shouldn’t exceed 36% of your gross income. If your home costs and monthly payments exceed these percentages, you most likely will not be approved by a mortgage broker.
Mortgages come in different types. Here are the most common loan agreements in Illinois:
Conventional Loans: These loans for buying a house in Illinois are not insured or guaranteed by the federal government and are available through private lenders like banks and mortgage companies. They typically require down payments between 3% and 20%. They generally have lower interest rates than government-backed loans but may be harder to qualify for, requiring a higher credit score. If your downpayment is less than 20%, you'll probably need to pay private mortgage insurance (PMI).
FHA Loans: These are insured by the Federal Housing Administration (FHA) and offer down payments as low as 3.5%. Because they are easier to qualify for, they are popular for first-time homebuyers or those with lower credit scores.
VA Loans: Guaranteed by the Department of Veterans Affairs (VA) for eligible military service members, veterans, and surviving spouses. They offer competitive interest rates and typically require no down payment, private mortgage insurance, or minimum credit score requirement.
USDA Loans: Fixed rate mortgages guaranteed by the U.S. Department of Agriculture (USDA) for low-to-moderate-income borrowers in eligible rural areas. They offer 100% financing and no down payment requirement.
Illinois Housing Development Authority (IHDA) Programs: IHDA offers various programs that can help make homeownership more affordable for Illinois residents, particularly first-time homebuyers. They offer down payment and closing cost assistance and interest-free loans that are forgiven over 10 years after buying a house in Illinois.
Find Out How Much Downpayment You Need
How much you need for a down payment in Illinois depends on your credit score, financial position, the mortgage loan program you use, the home price, the amount of earnest money deposit, and lender requirements. Required down payments from 3% to 5% for conventional loans and 3.5% for FHA loans are typical in Illinois. No down payment is required for VA and USDA loans, but there will be other closing costs. To avoid paying a monthly insurance premium (PMI). A 20% down payment is required.
Downpayment Assistance Programs in Illinois
Illinois Housing Development Authority (IHDA) - Offers several program incentives throughout the state with multiple lenders. Coupled with FHA, Conventional, VA, and USDA loan programs, borrowers can receive up to $10,000 in assistance with a minimal investment of their own funds.
A good real estate agent in Illinois is invaluable. They have experience, training, and know the market to make buying a house in Illinois quicker and easier. Sellers pay the real estate agent a commission, while buyers may pay a fee for having an agent represent them. Find an agent who lives locally, works full-time, closes a good number of properties per year, and has a great customer rating.
Look at Homes in Your Price Range
Look for houses within your price range, which means you shouldn’t pay more than 36% of your monthly income towards your mortgage and debts combined. Using an online Home Affordability Calculator can help you determine how much you can pay toward a monthly mortgage when buying a house in Illinois.
Add up your current monthly bills, including credit cards, student loans, etc., and compare them against your income. Make a list of your “must-haves” in the home you want, as well as “nice-to-haves”. Finding the right location is very important because you can’t change it later.
Make an Offer
Once you’ve found a house you’re interested in buying, your agent will walk you through the process of making an offer. Your agent will know if the seller wants to sell quickly or if the house has been on the market for a while. If so, the seller might accept a low offer.
Get a Home Inspection and Appraisal
Home inspections and appraisals are a critical piece to buying a house in Illinois. The inspection allows you to find out if there’s anything wrong with the house that could be costly to fix. The appraisal helps your mortgage lender ensure they’re lending an appropriate amount given the house’s value.
Inspections are done by a licensed professional who checks the house for any unseen, unexpected, or potential issues. Appraisals are done by an appraiser, hired by your lender, who determines how much the home is worth. There may be additional appraisal fees you need to pay to your lender.
While home inspections are not legally required when buying a house in Illinois, it is strongly recommended to get one and widely considered a standard practice in real estate transactions. Inspections typically cover the roof, foundation, plumbing, electrical, water, and sewer. The bottom line is that an Illinois home inspection is the only way to ensure that you know exactly what you’re getting when you buy a new house.
Set a Closing Date
Closing on your new home is usually done in an escrow and title company office and involves signing a bunch of documents, including the deed, the title, mortgage, title insurance, and disclosures, as well as paying closing costs, down payment, and other fees. Before closing, they'll review all of your financial situation, including bank statements, pay stubs, any unpaid taxes, your payment options, and whether or not this will be your primary residence.
First Time Homebuyer Programs in Illinois
Illinois offers statewide and local downpayment assistance programs to help first-time and low-income homebuyers achieve their dream of owning a home. They'll also help you make an informed decision on what you can and can't afford when buying a house in Illinois.
Illinois Housing Development Authority
Offers four programs for 30-year, fixed-rate mortgages from a participating lender. These loans are available to Illinois residents with a credit score of 640 or higher who are first-time or repeat homebuyers and meet the income threshold for their county, number of household members, and the property type they’re buying are eligible to apply.
Provides down payment and closing cost assistance for 4% of the purchase price, up to $6,000. The loan is forgivable monthly over 10 years as long as the homebuyer stays in the home for 10 years or more.
Provides payment and closing cost assistance of up to 5% of the purchase price or $7,500, whichever is greater. Program participants must contribute at least 1% of the purchase price or $1,000 of their own money toward the purchase of the home, whichever is greater. This is a 0% interest, 30-year second-mortgage, deferred for the life of the first mortgage.
Provides down payment and closing cost assistance of 10% of the purchase price up to $10,000, which borrowers repay on a monthly basis. This is a 0% loan that is repaid monthly over the life of the first mortgage.
Provides grants up to $7,500 in assistance for veterans, first-time homebuyers, and those who haven’t owned a home in the last three years. You must meet the lenders’ credit score and income threshold requirements to qualify. You also must contribute at least 1% of the purchase price or $1,000 from your own funds toward the home purchase. This can help with buyer closing costs and offers payment assistance when buying a house in Illinois.
Moving to Illinois? StraightLine Moving Can Help
Now that you know how to buy a house in Illinois, you need to get relocated to your new home! At StraightLine Moving, we will make it easy for you. We can help with everything from local moving, long distance moving, packing, and more. We’re here every step of the way.Â
