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What to know about buying a house in Illinois

First-time buyers in the state of Illinois are fortunate in many respects. For example, they can access special mortgage programs, educational courses, and counselors to guide them through the process.

Best of all, some buyers may be in line for a cash grant or an interest-free loan from one of the many down payment assistance programs in Illinois. This could help cover your down payment and closing costs and put you in a home much sooner than you thought possible.


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Illinois home buyer overview

The median home sales price in Illinois was $271,000 in April 2022, according to Illinois Realtors. That was a 4.2% increase from the prior year.

Luckily, home price inflation is much lower in Illinois than elsewhere. Nationwide, home prices increased 15.3% from April 2021 to April 2022, compared with only 4.2% in the Prairie State

Illinois home buyer stats

Average Home Sale Price in Illinois1 $271,000
Minimum Down Payment in Illinois (3%) $8,130
20% Down Payment in Illinois $54,200
Average Credit Score in Illinois2 719
Maximum Illinois Home Buyer Grant3 Up to 7% of purchase price as a grant in Aurora, Joliet and several other communities

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

First-time home buyer loans in Illinois

If you’re a first-time home buyer in Illinois with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20% down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

  • Conventional 97: From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
  • FHA loan: Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
  • VA loan: Only for veterans, active military members, reservists, and National Guard. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
  • USDA loan: For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
  • IHDA Mortgage: May include competitive interest rates and can be used with down payment assistance and tax-efficient mortgage credit certificates. More information below

Note that government loan programs (including FHA, VA, and USDA home loans) require you to buy a primary residence. That means you can’t use these loans for a vacation home or investment property.

In addition, most programs let you use gifted money or down payment assistance (DPA) to cover your down payment and closing costs. Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

If you’re unsure which program to choose for your first mortgage, your lender can help you find the right match based on your finances and home buying goals.

Illinois first-time home buyer programs

The Illinois Housing Development Authority (IHDA) has a division called IHDA Mortgage that provides a range of home buyer assistance programs. Eligible home buyers can opt for a 30-year fixed-rate mortgage with options for down payment and closing cost assistance of up to $10,000.

Visit the IHDA Mortgage website for a series of very user-friendly guides to what’s available. And note that, in common with almost every similar home buyer loan program, there are some conditions:

  • You have to choose a participating lender from the IHDA’s list
  • You must complete a homebuyer education course to qualify
  • Your credit score must be 640 or higher

You may be able to get a Mortgage Credit Certificate (MCC) with these loans, which might save you money on your federal taxes. But speak to a tax adviser to see if one will help you.

Illinois first-time home buyer grants

IHDA Mortgage provides a range of down payment assistance programs for eligible borrowers. Cash assistance maxes out at $10,000 or 10% of the purchase price, whichever is lower. And this is a second mortgage rather than a grant.

Depending on which IHDA program you qualify for, down payment assistance might take the form of:

  • A forgivable loan: A second mortgage that’s forgiven over 5 or 10 years. If you stay in the home that long, you won’t have to repay a cent. But you’ll have to repay the loan when selling the home or refinancing the mortgage before the loan term is up
  • A deferred second mortgage: Your loan balance comes due only when you refinance, sell the home, or pay off your primary mortgage. There’s zero interest on this loan
  • A repayable second mortgage: This interest-free loan is paid off over 10 years, with monthly payments at 0% interest

SmartBuy

IHDA also offers a program called SmartBuy, which can help first-time home buyers who want to purchase a home but have large student loan payments.

Via SmartBuy, you could qualify for $5,000 in down payment assistance as well as 15% of your purchase price (up to $40,000) toward student loans.

SmartBuy has been closed for new locks as of May 2022. However, the program presumably could be restored when new funding is allocated. So check its website for availability.

Eligibility for Illinois home buyer assistance programs

Like the IHDA Mortgage program, all these DPA options require a 640 credit score and a completed homeownership education course. You must also use one of the following mortgage programs for your first mortgage:

  • FHA, VA, or USDA loan
  • Conforming loan
  • Freddie Mac HFA Advantage loan

Additionally, income limits apply. Many loan programs base their income limits on the area median income (AMI). You can look up your county’s limits by using HUD’s median income family lookup tool.

Of course, don’t feel that you have to go with IHDA Mortgage. Many counties, cities, and towns in Illinois offer their own programs (see below). Compare those — and any others you come across — with this statewide program. And choose the one that suits you best.

In particular, check to see if the community where you’re buying is one of the many where the Illinois Assist Homeownership Program operates.

Buying a home in Illinois’ major cities

Unsurprisingly, Chicago has the highest home prices of Illinois’ big-three cities. But as of April 2022, those prices were flat year-over-year. So at least Chicago home buyers aren’t dealing with the sky-high inflation seen in many real estate markets across the country.

Real estate prices did rise in both Aurora and Joliet. Still, they remain more affordable than in the Windy City.

Chicago first-time home buyers

The median list price in Chicago was $349,900 in April 2022, according to Realtor.com. That was flat year over year.

At that median price, your down payment options might fall between:

  • $10,500 for 3% down payment
  • $69,980 for 20% down payment

The City of Chicago has several programs to assist first-time buyers. However, its website provides only limited information.

It says: “We will send you a ‘Home Ownership Kit’ with information on home ownership programs if you provide your name, address and ZIP code and daytime telephone number. The information on each program lets you know what steps to take next if you wish to participate in the program.”

To request your kit, click the “Get Started Online” button on this City of Chicago webpage. You can also get more information by calling (312) 744-0281.

Aurora first-time home buyers

The median list price in Aurora was $275,000 in April 2022, according to Realtor.com. That was up 12.3% year over year.

At that median price, your down payment options might fall between:

  • $8,250 for 3% down payment
  • $55,000 for 20% down payment

The City of Aurora provides up to $3,000 in DPA for most eligible home buyers, rising to $5,000 if you’re buying in a Neighborhood Revitalization Strategy Area (NRSA). However, to qualify, your household income cannot exceed 80% of the Area Median Family Income. That was $83,350 for a four-person household in 2022.

You must also commit to living in the home and maintaining it well for at least three years. There’s more information on this application form.

The City of Aurora is among the communities listed as eligible for the Illinois Assist Homeownership Program. This appears to offer generous grants (meaning you don’t have to repay the money) to home buyers who qualify. Click that link to see if you do. And, if you do, you may have found your best option.

Joliet first-time home buyers

The median list price in Joliet was $250,000 in April 2022, according to Realtor.com. That was up 6.4% year over year.

At that median price, your down payment options might fall between:

  • $7,500 for 3% down payment
  • $50,000 for 20% down payment

The City of Joliet website has details of the Illinois Assist Homeownership Program. That pays a 3% to 7% cash grant to qualifying home buyers to fund closing costs and down payment assistance. And, because it’s a grant, you don’t have to repay it.

Click that link to see if you are eligible. If you are, you might have found your ideal program.

Where to find home buying help in Illinois

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in Illinois or their local area.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources.

Statewide and regional first-time home buyer resources in Illinois

Illinois home buyer resources by city/town

You can also find home buyer resources and contact information for specific cities on HUD’s Illinois first-time home buyer page.

What are today’s mortgage rates in Illinois?

You can see today’s live mortgage rates in Illinois here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

1Source: Illinois Realtors Monthly Housing Market Report

2Source: Experian.com study of 2021 and 2020 data

3Based on a review of the state’s available DPA grants at the time this was written

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.




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