Featured Experts
Cami
Cami Freeman Director of marketing and communications, Illinois Housing Development Authority View bio
Jon Broadbooks
Jon Broadbooks Director of communications, Illinois Realtors View bio
Steve Siwinski
Steve Siwinski Senior vice president of mortgage origination, 1st Advantage Mortgage View bio

Chicago recently made news for having one of the highest underwater rates in the country, but Illinois’s overall housing market is gradually improving. (The ‘underwater rate’ is the proportion of homeowners who owe more on their houses than the houses are worth.) Illinois has a diversified economy. Like most of the country, however, the state is gradually recovering from an economic downturn that led to foreclosures and a drop in market rates. This guide will help you as you begin the home-buying process, whether this is your first home purchase or you are considering refinancing or moving.

1

Learn About Mortgage Rates in Illinois

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Mortgage rates in Illinois are slightly higher than the national average, but there are many factors that influence mortgage rates. Your rate is affected by the history of loans in the area as well as the type of property you’re purchasing. Even after you’ve studied average mortgage rates, however, you may find that the lender quotes a higher rate based on your credit score and the amount of down payment you are planning to put on the house. You can also pay discount points to help drive your mortgage rate down.

2

Help for Illinois First-Time Homebuyers

Fortunately, there are many resources available to first-time homebuyers. For more than 30 years, the Illinois Housing Development Authority (IHDA) has provided lending assistance to those purchasing their first homes in Illinois. Programs include the 1st Home Illinois program, which offers up to $7,500 in down payment assistance and a 30-year fixed rate mortgage. Qualifying homeowners of all types can take advantage of the @HomeIllinois Mortgage program, which is a safe 30-year fixed-rate mortgage that requires only a $1,000 down payment or one percent of the purchase price, whichever is greater.

“These are free, legit, and affordable resources that are there to educate,” says Cami Freeman, IHDA’s director of marketing and communications. “Legitimate resources are often provided free or at a nominal charge. Buyers and owners should beware of anyone who is asking for a significant fee for the services they provide.”

In addition to financial assistance, the IHDA also provides homebuyer education to Illinois buyers. Through training and counseling, buyers will know what to expect throughout the process, including how to determine how much of a house they can afford.

“Homeownership counseling not only helps a family understand what they can afford going in, but it establishes a relationship so if that family has a major event, they have a trusted source that they can turn to to help them through the process of refinancing or foreclosing if necessary,” says Freeman.

Need Financial Assistance? First-Time Homebuyers Should Check Here

First-time homebuyers in the state of Illinois have a wide variety of resources, which can be found through this tool.

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3

Understanding Affordability for Your Illinois Home Purchase

A wide variety of factors go into your monthly mortgage payment and it’s important to keep those in mind before you begin your search. Your interest rate, the amount of your down payment, and the price of the home you choose are all important factors. An online mortgage calculator can help you determine the amount you’ll pay on a mortgage in Illinois based on the zip code you enter.

Once you have determined how much of a monthly mortgage you can afford, price multiple loan options before making a final decision. Even a small savings in interest rate can add up over the course of a 30-year loan. You may also find that purchasing a home in one area of town or even crossing city lines can drive down the monthly amount you will pay.


Understanding How Illinois Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Bloomington-Normal $705 $150,200 (-5.70%) $160,000 $156,000 $154,000
Cape Girardeau $640 $136,300 (+3.00%) $136,100 $137,200 N/A
Champaign-Urbana $659 $140,400 (-1.00%) $143,100 $136,100 $143,100
Chicago-Naperville-Joliet $979 $208,600 (+8.40%) $218,900 $205,900 $191,300
Davenport-Moline-Rock Island $536 $114,200 (+4.40%) $121,600 $116,000 $114,600
Decatur $391 $83,300 (+1.30%) $94,300 $89,700 $84,800
Kankakee-Bradley $523 $111,400 (+12.00%) $116,500 $114,800 $111,500
Peoria $515 $109,800 (+4.40%) $120,700 $118,900 $114,400
Rockford $450 $95,800 (+21.90%) $91,400 $86,300 $86,600
Saint Louis $660 $140,700 (+4.40%) $150,600 $141,700 $134,300
Springfield $563 $120,000 (+4.20%) $121,600 $122,400 $116,900

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

4

Borrowing Limits in Illinois

Homebuyers face loan limits when they are purchasing a house using a lender. FHA loans are capped at $271,050 and conventional loans are limited to $417,000. In Illinois, the median home value is just over $161,000, so for many buyers on the low end, this loan cap will be sufficient. The median home value is higher in the Chicago metro area. Those interested in buying a more expensive house can offset the cap by shelling out a higher down payment.

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5

Experts Weigh In: Buying a Home in Illinois

expert

Cami Freeman is marketing and communications director of the Illinois Housing Development Authority.

expert

Jon Broadbooks is director of communications for the Illinois REALTORS®.

Where did Illinois’ housing market stand before the housing crisis? How does that compare to where it stands now?

Freeman

If we’re looking back over the past decade, the peak was in 2005. The homeownership rate in that year was 72 percent in Illinois. Currently, our homeownership rate is 66 percent, so you can see that the crisis really shifted people out of homeownership and into the rental market or homelessness.

Broadbooks

It depends on who you talk to but the independent analysis that we look at says that depending where you are, we are probably within 10 percent of being back to the pre-recession numbers in terms of median price. So the market is definitely recovering. That stated, one of the things that continues to be problematic is that inventory levels are still dramatically low. You’re seeing, for example, in the city of Chicago it doesn’t take much more than a month to sell a single-family home, which is lightning fast compared to historical averages.

What is the health of the markets in Illinois’ major cities? How does one city compare to another in terms of where it stood both before and after the housing crisis?

Freeman

In general, the housing crisis hit the metro areas of Illinois more than it had an impact in the rural areas. The metro cities gained the most in the peak and they lost the most in the crisis. But that’s certainly not to say rural Illinois was left unimpacted. In the metro areas, you certainly saw a bigger swing.

Broadbooks

I think everybody is seeing a general upward trend. There are some areas that aren’t seeing as fast a growth. Rockford, for example, isn’t growing as fast as Chicago. It really varies from place to place, but in general you’re seeing an upward trend everywhere.

What do first-time homebuyers need to know about buying a home in Illinois?

Freeman

They need to know about the Illinois Housing Development Authority. We have programs for the working-class family. Our income limits are over $100,000 in some areas of the state, so our products are available to working families. There is a section of our website dedicated to first-time homebuyers where we offer a lot of home-buying tips. One of the things that we strongly believe in is home ownership counseling. These counselors work free of charge. Their interest is getting people into homes they can afford.

Broadbooks

First, the best thing they can do is be very clear on exactly what it is they want when they look for a home. Second, they should make sure they have everything in line so that if they do find that home they want, they can move extraordinarily quickly because there are so few properties out there, they’ll be competing with a lot of people.

6

Illinois Closing Costs: What to Expect

Closing costs in Illinois are in line with neighboring states Indiana and Missouri, along with many other states. It’s important to realize, before sitting down to sign paperwork at closing, exactly what these costs entail. The bulk of closing costs covers the origination fees charged by the lender, but there are various third-party fees that will be paid at the same time. Before a lender will agree to finance a house, for instance, the buyer will be required to secure an appraisal and inspections as required by Illinois law.

In addition to down payment assistance from the IHDA, homebuyers can sometimes request that the seller pay all closing costs. This is requested as part of the contract, but in a competitive market, some buyers are offering to pay them. Prior to beginning your search, learn as much as possible about what to expect at closing and consider this expense throughout the process.

Average Closing Costs in the Prairie State

Average Origination
Fees
$1,080
Average Third-Party
Fees
$767
Average Total Closing
Costs
$1,847

Source: Bankrate’s 2015 survey of closing costs.

Refinancing a Mortgage in Illinois

Illinois is seeing a strong refinancing market as homeowners gain confidence in the economy. Steve Siwinski, senior vice president of mortgage origination for 1st Advantage Mortgage, has seen a pivot in the marketplace over the past 18 months. Although rates have been at historic lows for a couple of years and refinances are on the rise, he has seen the biggest development in the purchase market.

“I think the confluence of rates being at all-time lows and the recovering economy has provided real opportunity for homebuyers,” Siwinski says. “Of course, there will always be refinances when rates tick downward. I have seen savvy consumers also refinancing into different mortgage instruments.”

Instead of remaining in their current mortgages, Siwinski is seeing Illinois homeowners refinancing to reduce the terms of their current mortgages. This allows them to take advantage of a lower interest rate. They’re also currently refinancing 30-year fixed mortgages into 20- or 15-year products, which shortens the term of a loan, allowing them to save money on interest over the period they’re in a home.

Other Resources for Illinois Buyers

Illinois Housing Development Authority (IHDA)

This page includes resources for homeowners of all types, including an informative video series from Realtor.com.

Find a Lender

This section of IHDA lists the top-performing lenders in Illinois.

Mortgage Calculator

How much can you expect to pay each month? Use this calculator to determine what your mortgage payment will be.

City of Chicago Housing Initiative

Search a list of affordable properties, find a city-funded home to rehabilitate, and learn more about mortgage assistance available.

USDA Rural Housing Initiative

This program provides assistance to eligible homebuyers interested in buying in approved rural areas. Lenders receive a 90 percent loan note guarantee to reduce the risk of loaning to low- and moderate-income households.

Illinois Association of Community Action Agencies

These agencies specialize in social services to help build communities through homelessness prevention and housing counseling.

Illinois Realtors

This searchable directory can help a buyer learn more about a particular agent.

Illinois Mortgage Bankers Association

Members are listed here, including residential mortgage lenders, title insurance companies, and law firms.

Kane County First-Time Homebuyer Program

This program provides up to $10,000 in assistance for down payments and closing costs.

Good Neighbor Next Door

Law enforcement officers, teachers, firefighters, and EMS can qualify to purchase a property at half the appraised listing value. Only certain foreclosed properties are listed as part of this program and participants must sign up to receive text message notifications when homes are available.

Latin United Community Housing Association (LUCHA)

Since 1982, LUCHA has helped more than 68,000 low- to moderate-income residents in the Chicago area find affordable housing.