Updated: Jun 13
Illinois is one of the country's most unique states. Home to one of the best cities anywhere in the world, The Land of Lincoln has so much going for it.
Beyond the beauty of Chicago, Illinois also offers proximity to Lake Michigan, the entire Midwest, and the rest of the world by virtue of holding the United States' third busiest airport by passenger numbers.
All of these positives pave the way for a competitive housing market. And while Illinois is not experiencing mass inflows of Americans like Florida or Tennessee is, there are thousands of college graduates with student loan debt in the area that are looking to purchase their first homes.
And while the state as a whole is cheaper than the national average, anything in Chicago proper or its suburbs is likely to be expensive. Wherever you look to buy, remember that you'll also need to budget for a down payment and closing costs.
This article is a post to help you navigate the world of closing costs in Illinois.
What are closing costs?
Closing costs are the list of expenses that you incur as part of the home buying or home selling process. They include fees that you pay to your lender/bank, fees that you pay to your title company or real estate attorney, and other miscellaneous fees that you have to pay to get your new property ready to be closed on.
Unfortunately, most of these expenses are non-negotiable items that you must complete in order for the bank to give you the "clear to close."
Included in your closing costs are expenses such as your title search, mortgage application fee, underwriting fees, and the establishment of your escrow account. Usually, when you close in your title company's or real estate attorney's office you’ll bring a bank check for the total amount owed, but it is possible you may be asked to wire the money as well.
Who pays closing costs?
In Illinois, both buyers and sellers have their own expenses that they are generally responsible for paying for. However, it is common for buyers to ask sellers for closing cost assistance when negotiating a purchase and sales agreement. Whether the seller decides to do so is his or her own choice, but they may be more motivated to do so in a buyers market.
For the remainder of this article, we will discuss buyer costs only.
How much are closing costs in Illinois?
Generally, you can expect your closing costs in Illinois to cost about 2 to 5% of the homes purchase price. This large range is in part due to the varying home prices in the state of Illinois. Since certain expenses are relatively fixed regardless of the price your new home, those that buy cheaper homes may end up paying a larger percentage of the purchase price.
For an average $300,000 home in Illinois you’re likely looking at closing costs in the vicinity of about 3%. Of course, this is highly variable depending on a number of factors, including:
The property tax assessment in your new city or town
Whether your new home is part of a homeowner's association
Whether you close in the beginning or the end of a month
Let's take these one at a time.
1. Property taxes in Illinois
Property taxes across the state vary greatly in different areas around the state. The five counties with the highest average effective property tax rates are:
Winnebago County - 2.99%
Kendall County - 2.94%
DeKalb County - 2.87%
McHenry County - 2.87%
Lake County - 2.83%
Meanwhile, the following counties have the highest tax rates:
Hardin County - 0.84%
Pulaski County - 1.10%
Gallatin County - 1.21%
Wayne County - 1.26%
Alexander County - 1.29%
A $300,000 home would carry an annual tax bill around $8,970 in Winnebago County, but only around $2,520 in Hardin County.
This difference in rates will lead to different tax bills, which will consequently impact your closing costs, since you'll need to pay for a number of months of property taxes upon closing.
2. Homeowner's associations
Whether your new property is part of a homeowner's association will also impact your closing costs, since HOAs often carry transfer fees and other miscellaneous expenses.
These fees probably won't top a few hundred dollars, but it is still good to be prepared.
3. The date of your closing
Another variable that plays a large role in determining your closing expenses is the physical date on which it occurs. It is common to close as late in a month as possible, since you'll need to prepay mortgage interest for the remainder of the month.
Even a manageable $300,000 mortgage in its early days can have monthly interest obligations of over $1,000, so this could be a good idea to save some extra money.
Common Illinois closing costs
Let’s now explore the most common closing costs that Illinois buyers will pay.
1. Loan origination fee
Nationwide, most mortgage lenders charge you a loan origination fee for getting your mortgage all squared away. Typically, this origination fee typically costs between 0.5% and 1% of the amount that you’re borrowing.
So if you’re purchasing a $300,000 home have a $50,000 down payment in our financing the remaining $250,000 you can expect your loan origination fee to be between $1,250 and $2,500.
2. Mortgage application and underwriting fees
You can also expect to pay between $400 and $800 in mortgage application and underwriting fees. Your lender or bank will assess these fees in exchange for processing your application, and completing the underwriting process necessary to approve you for a home loan.
3. Establishing your escrow account
You’ll also want to be prepared to establish something known as an escrow account. Typically included in your expenses will be a number of months of real estate or property taxes, as well as a prepaid year of homeowner's insurance on your new home.
The bank will hold this money in escrow and pay your property tax and homeowner's insurance bills as they come due. On an ongoing basis, part of your monthly mortgage payment will also go to funding your escrow account.
4. Title search
Your title company or real estate attorney will also perform what is known as a title search on your new property. This title search is intended to find any legal issues with your new home, including any liens, undisclosed property owners, or any other legal issues.
Generally, a title search costs $200-$500. Usually, title searches are mandated by your lender, but you should still have one conducted even if not.
5. Title insurance
Title insurance protects you in the event that your real estate attorney or title company fails to pick up on a problem while conducting a title search. Title insurance is a one-time fee paid for at closing that normally costs between $300 and $1000.
This is money well spent in the event that a legal issue arises in the future. Most often, title insurance is mandatory since your lender is also trying to protect their own interests.
6. Home appraisal
A lender requirement, your home will need to be appraised by an independent home appraiser prior to close. Banks mandate this to protect their interests and assure that they are not loaning you more money than the home is intrinsically worth.
Most lenders are required to cycle through a list of approved appraisers in your area. When my wife and I bought a house in June of 2022, our home appraisal cost around $500.
7. Other miscellaneous fees
There will be other fees that pop over the course of the home buying process too. Common examples include things like credit reporting fees ($25-$75), courier fees, and other miscellaneous items.
Closing cost assistance programs in Illinois
Fortunately, the Land of Lincoln has a number of programs in place to help first time home buyers and other qualifying buyers to more easily afford the initial expenses on their new properties.
In fact, the Illinois Housing Department Authority offers their own program that offers up to $6,000 in assistance to use towards your down payment or closing costs.
IHDA Access Forgivable Mortgage program
Under the terms of the IHDA Access Forgivable Mortgage program, you may be eligible to receive up to 4% of the purchase price of your home, up to a total of $6,000.
You can use this financial assistance to use towards your closing costs and or your down payment. Under the terms of the program, you'll take out a 30 year fixed rate mortgage with an affordable interest rate.
Those that meet the minimum credit score and other requirements will have the $6,000 forgiven over ten years in monthly increments.
You may also consider the IHDA Mortgage Opening Doors or SmartBuy programs.
Tips to lower your Illinois closing costs
While closing costs in Illinois are far from cheap, we do have a number of insider tips to help you keep them as low as possible.
First and foremost, do some research and ask prospective lenders how many months of property taxes they'll require you prepay to establish your escrow account. It is possible that you will get the same answer from each lender, but it is still worth asking. You may find a lender willing to accept less months, which will leave more money in your pocket, but this is up to them.
Our second tip to keep your costs low is to comparison shop title companies and real estate attorneys in your area. And while you don't want to work with someone that does not know what they are doing, you may be able to save some money by comparison shopping the title services you need done.
Finally, you may consider deliberately searching for homes in low tax counties. Do keep in mind that a town or county's tax rates may dictate the quality of its' services, such as public education, so families with children may be more willing to accept higher tax rates.
Download our Illinois closing cost calculator
We've built a closing cost calculator especially for prospective Illinois home buyers trying to understand how much home they can afford. Our calculator can help you:
Keep track of your prospective Illinois closing expenses
Estimate your total cash required to close on your home, including your down payment and other non closing related items that you will pay for at closing
Prepare financially for the unspoken expenses of the homebuying process
Grab your copy below!
Closing cost guides in nearby states
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