How Much Does It Cost to Buy a Home in Illinois?
When you’re preparing to buy a home in Illinois, the purchase price is only part of the financial picture. In addition to your down payment, there are several upfront and closing costs that buyers should plan for.
Understanding these expenses early can help you build a realistic budget, avoid surprises and determine how much cash you may actually need to complete your purchase.
The Down Payment
Your down payment will typically be the largest upfront expense when purchasing a home. How much you need depends on the type of financing you use, the property and your individual loan qualifications.
While 20% down is often discussed as the standard, many buyers purchase homes with considerably less. Some conventional loan programs may allow qualified buyers to put down as little as 3%, while FHA, VA and other loan programs have their own requirements.
Putting less than 20% down may result in mortgage insurance or other costs, so it is important to look at more than just the minimum down payment when comparing your options.
A qualified mortgage professional can help you determine which loan programs may be available to you and what makes the most sense for your financial situation.
Earnest Money
After your offer is accepted, you will generally be required to deposit earnest money.
Earnest money demonstrates your commitment to the transaction and is typically held in an escrow account until closing. The amount varies based on the property, purchase price, contract and circumstances of the transaction.
The important thing to remember is that earnest money generally isn't an additional charge on top of the purchase price. If the transaction proceeds to closing, it is typically credited toward the funds you owe at closing.
Home Inspection
Most buyers choose to have the property professionally inspected shortly after going under contract.
Inspection costs vary depending on the property and the services performed. Additional inspections or testing may also be appropriate depending on the home, including radon testing, sewer scopes, well and septic inspections or other specialized evaluations.
Although an inspection adds to your upfront expenses, it can provide valuable information about the property's condition before you move forward with the purchase.
Attorney Fees
Real estate attorneys play an important role in Illinois residential transactions.
Your attorney may review the contract, handle attorney review matters, communicate with the other parties and title company, review closing documents and represent your interests throughout the legal portion of the transaction.
Attorney fees vary by firm and the complexity of the transaction, so buyers should ask their attorney about fees and services early in the process.
Appraisal
If you are financing your purchase, your lender will generally require an appraisal.
The appraisal provides the lender with an independent opinion of the property's value and helps determine whether the home provides sufficient collateral for the mortgage.
The cost varies depending on the property and lender and is generally paid by the buyer as part of the loan process.
Lender and Loan Costs
Your mortgage can include several additional expenses beyond your down payment.
Depending on your lender and loan program, these may include an origination or underwriting fee, credit report fee, discount points, prepaid interest and other financing-related charges.
When shopping for a mortgage, don't compare lenders based only on the advertised interest rate. Review the loan terms, estimated closing costs and total cost of borrowing.
Title and Closing-Related Costs
A real estate closing involves title work, recording documents and other services necessary to transfer ownership and complete the transaction.
Which expenses are paid by the buyer or seller can depend on the contract and circumstances of the sale. Your attorney, lender and real estate broker can help you understand which costs you should expect in your particular transaction.
Property Taxes and Escrows
Illinois property taxes are another important part of planning for homeownership.
Depending on your mortgage, your lender may establish an escrow account to collect money toward future property tax and homeowners insurance payments. That can require an initial escrow deposit at closing.
Property taxes also affect your total monthly housing expense, so buyers should consider the home's taxes when determining what they can comfortably afford—not just the purchase price and mortgage payment.
Homeowners Insurance
Mortgage lenders generally require homeowners insurance to be in place before closing.
Premiums can vary considerably based on the property, coverage, deductible and insurer. It is a good idea to begin obtaining insurance quotes before closing rather than waiting until the last minute.
Certain properties may also require additional coverage depending on location and risk factors.
So, How Much Cash Do You Actually Need?
There isn't one percentage or dollar amount that works for every Illinois home purchase.
Your total cash requirement can include:
Down payment
Earnest money
Inspection and testing
Attorney fees
Appraisal and lender fees
Closing costs
Initial tax and insurance escrows
Homeowners insurance
Moving and immediate homeownership expenses
Some of these costs are paid before closing, while others are included in the amount you bring to closing. Certain costs may also be negotiated or structured differently depending on the transaction.
That's why one of the best things you can do before seriously shopping for a home is understand the entire cost of buying, not simply how much you qualify to borrow.
Start With a Plan
Buying a home involves a lot of moving pieces, but the process becomes much easier when you know what to expect before you begin.
At AED Realty, we help buyers understand the process, evaluate properties and make informed decisions from the initial search through closing.
If you're considering buying a home in Illinois, start by exploring our Buyer Resources, search current Properties for Sale, or contact AED Realty to discuss your plans.
Clarity. Strategy. Execution.