Illinois Mortgage Rates

Living in Illinois

If you’re looking to buy a home in Illinois, the good news is that lately, prices in the Prairie State haven’t been on the same tier as they have been elsewhere (hello, Nevada and Idaho).

In 2018, the median home price in Illinois was $202,000, up just 3.6% from the year before and the lowest percentage increase since 2015. More recently, the median home price in April statewide was $214,207, and $253,000 in the nine-county Chicago metro area, according to Illinois Realtors. Those numbers reflected respective increases of 2% and 1.2% from the year before.

Still, buying in Illinois should come with careful planning. For one, residents pay some of the highest property taxes in the country, and job growth continues to lag other states.

Illinois still offers a wide range of living opportunities, from busy, architecture-rich Chicago, to popular suburbs like Evanston and small historic towns like Galena. However, in April, home sales were down 5.6% statewide and 5.9% in the Chicago area compared with a year ago. The good news for sellers: It still took an average of 54 days to sell a home in Illinois — the same as in 2018 — but the supply of homes on the market was almost 2% lower.

The rules and costs of buying a home in Illinois

As in most states, the real estate market in Illinois is governed by specific rules, regulations and tax laws. Here are some of the most important things to know:

Home seller and buyer laws

According to Illinois law, sellers are required to provide potential buyers with a residential property disclosure report before a sale can be completed. The report asks sellers to disclose whether they have ever had knowledge of some two dozen home defects like flooding, structural damage, unsafe drinking water or problems with internal systems like those for plumbing, electricity and sewage. Sellers are also required to let buyers know whether their homes may pose a risk of exposure to radon.

As a potential homeowner you should know that Illinois is a judicial foreclosure state. This means lenders are required to take their case to court before they can foreclose on your home in case you can’t pay your mortgage. Illinois also allows for so-called deficiency judgements. This means a lender can sue you to recoup any losses if the sale price of your foreclosed home is less than the mortgage amount. However, they can only do so if the homeowner has been personally served.

Like most states, Illinois is an equitable distribution state when it comes to deciding how a couple’s assets (including property) and debts will be split after a divorce. In common property states, marital assets are split equally in half, but Illinois courts are required to ensure that the split is fair and equitable, based on factors like each spouse’s income and earnings potential.

Illinois is also an escrow state, which means state law does not require buyers to hire an attorney to oversee a home closing. Instead, buyers can use a representative from a title company.

Taxes

When property changes hands, most states—and many municipalities—collect a real estate transfer tax. In Illinois, the state collects a tax based on the property’s sale price and calculated at the rate of $0.50 for each $500 of value. This means the sale of a $250,000 home would require payment of a $250 state transfer tax.

Many municipalities in Illinois collect a transfer tax, too. Counties, for example, are allowed to collect a tax equal to $0.25 for every $500 of home value. Once you’ve identified a home to buy, your lender is responsible for letting you know exactly how much transfer tax either you or the lender will have to pay.

According to Tax-Rates.org, Illinois now has one of the highest property tax rates in the U.S., with only six states charging a higher percentage. As in most states, your exact property tax rate will depend on the county where you live. However, the average rate in Illinois is now 1.73%, which means a homeowner would need to pay $3,507.00 per year for a home worth $202,200. If you’re looking to buy in Lake County, in the northeastern corner of the state, expect to pay much more, about $6,285 a year.

It is possible to lower your property tax bill in Illinois by taking advantage of one of the exemption programs available statewide. For example, Illinois offers a general homestead exemption that can help you shave your final bill by exempting up to $10,000 of the value of your home if you live in Cook County, or $6,000 if you live in other counties. The state offers similar exemption benefits to qualified low-income individuals over 65, veterans, and those with permanent disabilities.

Conforming loan limits

Throughout Illinois, the conforming loan limit for a single-family home is now $484,350, the same as it is for most of the U.S. Keep this number in mind as it represents the maximum loan amount homebuyers can take on and still qualify for a government-insured conforming loan. Conforming loans generally offers borrowers the best interest rates, especially if they have strong credit. If you need to borrow more than the conforming loan limit in your area, your loan will need to be a jumbo loan, and it will probably come with a higher interest rate.

Programs for homebuyers in Illinois

Homebuying help is available in the Prairie State. The Illinois Housing Development Authority (IHDA) offers qualified buyers access to both an affordable, 30-year, fixed-rate mortgage and up to $10,000 for help paying down payment and closing costs.

To qualify for IHDA help, buyers must meet the following requirements:

  • Have a minimum credit score of 640
  • Meet county household income limits and purchase price limits
  • Have a maximum debt-to-income (DTI) ratio of 45%
  • Contribute $1,000 or 1% of the home’s purchase price, whichever is greater.
  • Complete homeownership counseling before closing

You can learn more about IHDA programs, and also see more details below.

IHDAccess Forgivable

  • Offers down payment assistance equal to 4% of the home’s purchase price, up to $6,000
  • Loan is forgiven if homeowner stays in home for 10 years
  • Can be used with conventional mortgages and government-backed loans like those from the FHA, VA, and USDA

IHDAccess Deferred

  • Offers down payment assistance equal to 5% of the home’s purchase price, up to $7,500
  • Repaid, with 0% interest, once the loan matures (30 years), or the homeowner refinances or sells the home

IHDAccess Repayable

  • Offers down payment help equal to 10% of the home’s purchase price, up to $10,000
  • Repaid monthly over 10 years with 0% interest

1st Home Illinois

  • Available only to those buying in Cook, Marion, St. Clair, or Winnebago counties
  • Offers a 30-year, fixed-rate mortgage and a $7,500 grant for down payment and closing costs
  • Aimed at first-time buyers, veterans and anyone who has not owned in the past three years
  • Property must be an existing home (new construction not eligible)
  • Grant is forgiven if buyer stays in home at least 5 years

Rate shopping tips

Shopping around for a mortgage rate is one of the best ways to cut costs when you’re buying a home. Check these tips to get started:

Contact at least three lenders on the same day

Mortgage interest rates change daily, so for the most accurate comparison talk to lenders on the same day to ensure each lender is using the same base interest rate. You’ll also do better by contacting a wide range of lenders, like smaller, local lenders and those online.

Give each lender the same information

By providing lenders the exact same information, you’ll up your chances of making a fair comparison. To start, lenders will want to know more about the type of home you’re buying, the price, and the loan terms you’d prefer, like a 30-year, fixed-rate mortgage over a 15-year, adjustable-rate loan. Your lender will also need to access your credit score. Eventually, you’ll be asked to show proof of income, tax records, and all financial statements. Be ready to show how much you have in assets like savings, mutual funds and retirement accounts, and also how much you owe on other loans, credit cards and student debt.

 Add up all lender fees to determine the total cost of your loan 

Be prepared to pay lender fees in addition to mortgage interest. While every lender is different, these fees usually include an application fee, underwriting fees, and a fee to record your mortgage. You may also need to pay discount points if your lender agreed to a lower interest rate. Look for these fees in the loan estimate your lender is required to provide you within three days of receiving your loan application.

Know when to lock in the rate

Once you’ve found a loan program that meets your needs, make sure the lender “locks in” the interest rate and get it in writing. That way you’ll be shielded if market interest rates go up before you close on your home. For perspective on where market rates are headed, check in with your lender.

The information in this article is accurate as of the date of publishing.