Illinois Closing Costs for Buyers: What to Expect
When you're buying a home in Illinois, your down payment is only one part of the money you'll need to complete the purchase. Buyers may also be responsible for lender fees, appraisal costs, attorney fees, insurance, prepaid expenses, escrow deposits and other closing-related charges.
Knowing what these expenses are—and when you'll need to pay them—can make the financial side of buying a home much easier to plan for.
What Are Closing Costs?
Closing costs are the expenses associated with completing your home purchase and, if applicable, obtaining your mortgage.
They're separate from the home's purchase price and down payment, although all of these numbers come together when determining how much money you'll ultimately need to close.
Some expenses are paid before closing, while others appear on your final closing statement.
The exact amount varies considerably from one transaction to another based on your loan, purchase price, property, insurance, taxes and other factors.
Loan and Lender Fees
If you're financing your purchase, some of your closing expenses will be associated with obtaining the mortgage.
Depending on your lender and loan program, these may include:
Loan origination or underwriting fees
Credit report fees
Processing fees
Discount points, if applicable
Other lender-related charges
Your lender will provide disclosures showing the estimated costs associated with your mortgage.
When comparing lenders, look beyond the interest rate. Two loans with similar rates can have different fees and overall costs.
The Appraisal
Most mortgage lenders require an appraisal before approving the loan.
An independent appraiser develops an opinion of the property's value, which helps the lender determine whether the property provides sufficient collateral for the mortgage.
The buyer generally pays for the appraisal, and it may be paid before closing rather than as part of the final amount due.
Attorney Fees
Illinois buyers commonly work with a real estate attorney during the transaction.
Your attorney may assist with attorney review, review legal and closing documents, address issues that arise during the transaction and represent your interests through closing.
Attorney fees vary by firm and transaction, so ask your attorney about their services and fee structure when selecting representation.
Homeowners Insurance
If you're obtaining a mortgage, your lender will generally require homeowners insurance before closing.
You may need to pay an insurance premium in advance as part of establishing coverage.
Insurance costs depend on factors such as the property, coverage limits, deductible, claims history and insurer. Starting the insurance process early also gives you time to compare coverage rather than scrambling shortly before closing.
Property Taxes and Your Escrow Account
Many mortgages include an escrow account used by the lender to pay future property taxes and homeowners insurance.
If your loan includes escrow, you may be required to deposit money into that account at closing.
Illinois property taxes can make this part of the transaction seem confusing because taxes are generally paid in arrears. Depending on the contract, the seller may provide the buyer with a credit for the seller's share of taxes that have accrued but have not yet been paid.
Your lender and attorney can help explain how the tax credits and escrow requirements affect the amount you need at closing.
Prepaid Interest
Mortgage interest typically begins accruing when your loan is funded.
Depending on when during the month you close, your lender may collect prepaid interest covering the period between your closing date and the beginning of your regular mortgage payment cycle.
This is one reason the exact amount needed to close can change depending on the closing date.
Title and Recording-Related Charges
Completing a real estate purchase involves title work, recording documents and other closing services.
Exactly which charges are assigned to the buyer depends on the contract, property and transaction.
Your attorney and lender can help you review these items before closing so you understand what you're paying and why.
What About the Home Inspection?
A home inspection is an important expense to budget for, but it usually isn't a closing cost in the strict sense.
The inspection generally takes place shortly after your offer is accepted and is normally paid for at the time the service is performed.
Depending on the property, you may also choose additional services such as radon testing, a sewer scope, well or septic inspections, or specialized evaluations.
These expenses occur before closing, which is why buyers need access to some cash during the transaction—not just on closing day.
Is Earnest Money a Closing Cost?
No. Earnest money is generally a deposit made after your offer is accepted rather than a fee for purchasing the property.
If the transaction proceeds to closing, your earnest money is typically credited toward the funds you're required to provide.
For example, if your final amount due from you were $30,000 and you had already deposited $5,000 in earnest money, that deposit would generally be reflected when calculating the remaining amount you need to bring to closing.
Can the Seller Pay Some of a Buyer's Closing Costs?
Potentially.
A buyer may negotiate for a seller credit that can be applied toward certain allowable closing costs, subject to the purchase contract and any limitations imposed by the buyer's lender or loan program.
A seller credit isn't automatically "free money." It is one financial component of the overall offer and may affect how a seller evaluates it.
That's why it's important to structure an offer based on both your financial needs and the competitive circumstances surrounding the property.
How Much Should You Budget for Closing Costs?
You'll sometimes see closing costs described online as a simple percentage of the purchase price. While percentages can be useful for rough planning, they shouldn't be treated as a quote.
The actual amount depends on too many variables—including your mortgage, lender, insurance, taxes, closing date and property—to give every Illinois buyer one accurate percentage.
Before making an offer, your lender can provide estimates of your financing-related costs. Your real estate broker can also help you understand other expenses associated with the transaction.
As you approach closing, you'll receive more detailed figures showing the actual amount required.
Don't Spend Every Dollar on the Closing
There's another number that matters just as much as your cash to close: how much money you'll have left afterward.
Owning a home comes with expenses that renting may not.
Moving, furniture, appliances, repairs, maintenance and unexpected problems don't wait until you've rebuilt your savings.
When deciding how much to put down or how much home you can afford, consider maintaining an appropriate financial cushion after closing rather than focusing exclusively on the maximum purchase price you qualify for.
Know the Numbers Before You Make an Offer
Closing shouldn't be the first time you find out what buying the home is actually going to cost.
Before you begin seriously shopping, develop a realistic picture of your down payment, estimated closing expenses and other upfront costs. Then you can search for homes within a range that makes sense for your overall financial situation.
At AED Realty, we help Illinois buyers understand the process, evaluate their options and know what to expect from the initial search through closing.
Explore our Buyer Resources, read How Much Does It Cost to Buy a Home in Illinois?, search current Properties for Sale, or contact AED Realty to start building your homebuying plan.
Clarity. Strategy. Execution.