To buy a home in Chicago’s Northwest Suburbs, most buyers need money for three main expenses: the down payment, closing costs, and inspections.
Depending on the loan program, a down payment may be as low as 3% to 3.5% of the purchase price. Buyer closing costs often range from 2% to 3%, while inspections may cost about $600 to $1,200.
For a $400,000 home with 5% down, a buyer might need approximately $30,000 to $35,000, plus money left in savings after closing.
That is the general answer. Now let’s walk through where the money goes, because many buyers are relieved to learn that they do not need a 20% down payment.
Key Takeaways
- You may not need 20% down. Some conventional loans begin at 3% to 5%, FHA loans may allow 3.5%, and eligible VA buyers may qualify for 0% down.
- Illinois buyer closing costs often range from 2% to 3% of the purchase price, although the final amount depends on the loan, property, taxes, and insurance.
- Earnest money is not usually an additional expense. It is paid early and then credited toward the amount due at closing.
- Plan for inspection expenses, including possible radon testing and a sewer scope.
- Try to keep money in reserve after closing instead of using every available dollar to buy the home.
What Are the Main Costs of Buying a Home?
When buyers ask how much money they need, they are often thinking only about the down payment. Your actual budget has several parts.
Down payment. This is the portion of the purchase price you pay instead of borrowing. The minimum depends on your loan program.
Some conventional loans allow down payments as low as 3% to 5%. FHA loans may allow 3.5%, and qualified veterans and service members may be eligible for a VA loan with no down payment.
Putting less than 20% down on a conventional mortgage may add private mortgage insurance, often called PMI, to your monthly payment. That does not automatically make a smaller down payment a bad choice. PMI can allow a buyer to purchase sooner instead of waiting years to save 20%.
Closing costs. These may include lender fees, an appraisal, title charges, attorney fees, recording fees, homeowners insurance, and money collected for your property tax escrow account.
Illinois buyers often spend approximately 2% to 3% of the purchase price on closing costs, but the amount varies. My guide to closing costs in Illinois provides a closer look at the common charges.
Inspections and other upfront expenses. A general home inspection in the Northwest Suburbs may cost about $400 to $600. Radon testing, a sewer scope, or other specialized inspections will increase the total.
A reasonable starting estimate is $600 to $1,200 for inspections, depending on the property and the services you choose. These expenses are normally paid during the contract period rather than at closing.
Money left in reserve. A reserve fund is not part of your official cash-to-close, but it can make your first year of homeownership much less stressful.
Why Can Closing Costs Be Higher Than Buyers Expect?
Property taxes are one reason buyers in Cook County may need more cash at closing than they expected.
When you buy with a mortgage, the lender may collect several months of property taxes to establish your escrow account. The lender may also collect the first year of homeowners insurance or require you to pay the premium before closing.
Those prepaid expenses can add several thousand dollars to the amount due at closing, especially in communities with higher property taxes.
This money is not simply an added fee. It is being set aside for future tax and insurance bills. Still, you need to have the funds available on closing day.
My guide to how property taxes work in Cook County explains the local system. The Consumer Financial Protection Bureau also provides helpful information about mortgages and closing costs.
Where Does Earnest Money Fit In?
A lot of buyers do not realize that earnest money is usually not an additional expense. It is simply paid earlier in the process.
After your offer is accepted, you will usually deposit earnest money within the deadline stated in the contract. The amount varies based on the purchase price, contract terms, and local practices.
The money is held in an escrow account during the transaction. At closing, it is normally credited toward your down payment and closing costs.
When planning your savings, do not count earnest money as a separate fourth expense. Just remember that part of your funds must be available soon after your offer is accepted.
Example: Buying a $400,000 Home With 5% Down
Here is a simple example of what the numbers might look like:
- Down payment at 5%: $20,000
- Estimated closing costs at 2.5%: $10,000
- Estimated inspection expenses: $800
- Estimated total: approximately $30,800
This is only an example. Your actual total will depend on the loan, property taxes, insurance, lender fees, inspection choices, and contract terms.
The amount may also change based on the following:
- A smaller down payment: A qualifying loan with 3% or 3.5% down may reduce the amount needed upfront.
- A larger down payment: Putting 10% down increases your upfront cost but may reduce your monthly mortgage insurance.
- Seller credits: Depending on the market and loan rules, a seller may agree to contribute toward some of the buyer’s closing costs.
- A different price point: A lower purchase price usually means a smaller down payment and lower closing costs.
Your lender will prepare estimates based on your financial situation and loan program. Before closing, you will also receive a Closing Disclosure showing the final loan terms and the amount you are expected to bring to closing.
What If You Do Not Have the Down Payment Yet?
There may be assistance available, depending on your income, credit, purchase price, location, and loan program.
The Illinois Housing Development Authority offers down payment assistance programs for qualified buyers. Some programs provide assistance that must be repaid, while others may be forgiven over time if the buyer meets the program requirements.
Programs and eligibility guidelines can change, so speak with an approved lender before including assistance in your homebuying budget.
You can learn more in my guide to IHDA down payment assistance or review current information through the Illinois Housing Development Authority.
Gift funds from family may also be allowed with proper documentation. Some employers, unions, banks, and local organizations offer homebuyer benefits, so those are worth checking too.
How Much Should You Keep in Savings After Closing?
Try not to use every dollar you have to purchase the home.
A helpful goal is to keep two to three months of your new housing payment in savings after closing. It is also wise to have a separate cushion for repairs and maintenance.
Many homes in Arlington Heights, Palatine, Mount Prospect, Buffalo Grove, Wheeling, and nearby communities were built several decades ago. Even a well-maintained home may need a water heater, sump pump, appliance, or other repair during the first year.
A home repair cushion of $2,000 to $5,000 can turn an unexpected expense into something manageable.
Buying a slightly less expensive home or waiting a little longer to save is not falling behind. It may help you enjoy the home without feeling financially stretched after moving in.
How Much Money Will You Really Need?
Many Northwest Suburban buyers may need somewhere between $20,000 and $50,000 in total cash, depending on the home price, loan program, down payment, and closing costs.
Some qualified buyers may need less with down payment assistance, gift funds, seller credits, or a loan program with a smaller down payment.
The best way to find your number is to speak with a trusted lender. A lender can estimate the down payment, monthly payment, closing costs, mortgage insurance, taxes, and cash needed for several different price points.
My guide to buying a home in the Northwest Chicago suburbs explains how this budget fits into the larger homebuying process.
Frequently Asked Questions
How much money do you need to buy a $400,000 home in Illinois?
With 5% down, a buyer might need approximately $30,000 to $35,000 for the down payment, closing costs, and inspections. The actual amount will depend on the loan, taxes, insurance, lender fees, and property.
Do you need 20% down to buy a home in the Chicago suburbs?
No. Some conventional loans allow down payments as low as 3% to 5%. FHA loans may allow 3.5%, and eligible VA buyers may qualify for no down payment. A smaller down payment may increase the monthly payment or require mortgage insurance.
How much are buyer closing costs in Illinois?
Buyer closing costs often range from 2% to 3% of the purchase price. These may include lender charges, an appraisal, title fees, attorney fees, recording fees, insurance, and property tax escrow deposits.
Is earnest money separate from the down payment?
Earnest money is paid shortly after the offer is accepted, but it is normally credited toward the buyer’s down payment and closing costs. It is not usually an additional cost on top of the total amount needed.
What down payment assistance is available in Illinois?
IHDA and other organizations may offer assistance to qualified buyers. Eligibility depends on factors such as income, purchase price, credit, location, and loan type. Program terms change, so verify current options with an approved lender.
How much should you have in savings after buying a home?
A helpful goal is to keep two to three months of your total housing payment in reserve, along with money for home repairs and maintenance. The right amount depends on your income, monthly expenses, job stability, and the condition of the home.
Let’s Find Your Real Number
Online calculators can give you a general range, but a personal plan will give you a clearer picture.
If you are trying to understand what you can comfortably buy in the Northwest Suburbs, I can help you compare price points, communities, home types, and the costs that come with each option.
You can schedule a time to talk, visit MyRealtorMari.com, or email me at [email protected].
For buyer education and a closer look at our local communities, visit Life in the NW Burbs on YouTube.
