How Much Money Do You Actually Need to Buy a Home in Chicago?
The answer depends on your loan, purchase price and property, but there are several expenses every buyer should understand.
How Much Do You Need for a Down Payment?
One of the biggest misconceptions I hear from first-time homebuyers is that you need 20% down to buy a home in Chicago. You don't. But your down payment also isn't the only expense you should plan for.
A 20% down payment can help you avoid private mortgage insurance (aka PMI) on many conventional loans, but plenty of buyers purchase homes with substantially less. And PMI rates have come down significantly from when prior generations had to consider PMI, typically under $100/month depending on purchase price and loan size (vs several hundred per month in the past). With my first condo purchase, I decided the $65/month PMI payments were worth it, while I built equity and was able to remove PMI after 3 years rather than attempting to save 20% at a much higher savings goal each month.
Depending on the loan program and your qualifications, lower down-payment options may be available.
Rather than automatically aiming for 20%, I recommend talking with a lender about how different down payments affect your: monthly payment + interest rate + mortgage insurance + cash remaining after closing.
Keeping some savings available after purchasing can sometimes be more valuable than putting every available dollar toward the down payment.
What Closing Costs Do Chicago Buyers Pay?
In addition to your down payment, buyers should budget for Chicago closing costs.
Depending on the transaction, these can include:
Lender and appraisal fees
Attorney fees
Title and recording charges
Chicago transfer tax
Prepaid interest
Homeowners insurance
Property tax and insurance escrows
For financed purchases, these costs can add several thousand dollars beyond the down payment. Your lender should provide a detailed estimate based on your actual loan and purchase price. My rule-of-thumb is 2-3% and there are purchase scenarios I’ve worked on with buyers to obtain credits from the seller to help reduce closing costs.
Don't Forget the Home Inspection
I almost always recommend that buyers budget for a professional home inspection - typically $600-1000 depending on size of home. Depending on the property, additional inspections or evaluations may also make sense.
An inspection is one of a few upfront expenses that is out of pocket for buyers, but it's a relatively small one compared with the investment you're making.
What About Condos?
If you're buying a condo in Chicago, your monthly HOA assessment needs to be included in the affordability calculation.
A condo with a lower purchase price but a $900 monthly assessment could ultimately cost more each month than another property with a higher price and much lower assessment.
That's why I prefer to start with a buyer's comfortable total monthly housing budget, rather than just asking for their maximum purchase price.
How Much Cash Should You Keep After Closing?
Ideally, closing on your home shouldn't leave your savings account at zero. Homes have a habit of creating expenses shortly after you get the keys — furniture, moving, repairs or simply discovering something you want to change.
Having reserves gives you flexibility and makes the transition into homeownership much more comfortable. There are rule-of-thumb budget numbers I often share with new homeowners depending on property type, size, age, etc.
How Do You Determine Your Chicago Home-Buying Budget?
Start with the monthly payment you're genuinely comfortable carrying.
Then work backward with your lender and Realtor to understand what purchase price, down payment and property type fit within that number. Working with a lender and Realtor (like myself) that have experience owning their own home comes in handy tremendously, beyond just closing day.
Getting pre-approved doesn't mean you need to spend the maximum amount you're approved for.
If you're considering buying a home in Chicago, even if you're 6–12 months away, I'm happy to help you build a realistic picture of the costs before you start seriously searching. Knowing the numbers early makes the entire process much easier.
