Mortgage Rates Illinois: Check Rates From Major Lenders
If you're planning to buy a house in Illinois, now's the best time! According to a survey by a local real estate firm, people who delayed selling their homes during the COVID-19 pandemic are now putting their properties on the market.
But before you start house hunting, you need to understand how mortgage and refinance rates work – that’s what we’re mainly going to cover in this guide! By the end, you'll know exactly what to do to get the best deal on your next house!
Mortgage Loan Options Illinois
Buying a home isn't as simple as picking out a property and reaching out to the seller. Unless you can pay for the house in cash, you need to get a mortgage.
Generally, there are two types of home loans available: conventional and government-backed mortgages. Each of these has varying interest rates, minimum down payment (DP) amount, and borrower qualifications.
Conventional mortgages are loans that are not backed by the federal government. As such, they are only issued to borrowers with good credit and a stable employment/income history.
A conventional loan can be used to buy any property type, like a vacation home or an investment property. This kind of mortgage also tends to close faster, since it has fewer documentary requirements compared to government-insured mortgages.
Under conventional loans, you'll find the following:
Conforming loan: Conforming loans are those that fall within maximum limits set by the Federal Housing Finance Agency. In Illinois, the limit for one-unit properties is $548,250, on par with the national average.
Nonconforming loan: Nonconforming loans are those with loan amounts that exceed conforming limits. These types of mortgages are riskier to a lender, so they come with stricter credit requirements and higher interest rates.
Government-insured mortgages are designed to boost the homeownership rate among low- to moderate-income borrowers. These mortgages also come with low/no down payment options, as well as more relaxed credit score requirements.
Unlike conventional loans, government-insured mortgages can only be used for specific types of properties. They also come with more eligibility and documentary requirements.
Some of your options include:
Federal Housing Administration (FHA) Loan: FHA loans are designed to help people purchase single- or multi-family homes. Eligible borrowers can get FHA loans for a minimum down payment of 3.5% and a credit score of 580. Those with a lower credit rating (500-579) can still get this type of mortgage if they can make a 10% down payment.
US Department of Agriculture (USDA) Loan: USDA loans are meant to help low-income borrowers purchase a property in a USDA-designated rural area. Qualified homebuyers can get the loan without making a down payment.
US Department of Veterans Affairs (VA) Loan: VA loans are benefits extended to servicemembers, veterans, and their surviving spouses. Like USDA loans, VA loans do not require a down payment. Keep in mind, however, that borrowers are required to pay VA fees.
When taking out a mortgage, you will also make a choice between a fixed or adjustable mortgage. The decision you make will affect whether mortgage rates can change and how much interest you'll have to pay over the life of the home loan.
A fixed-rate mortgage has an unchanging interest rate throughout the entire term of the loan. As such, your monthly payment amount will remain consistent. In most cases, you can choose from a 15-, 20, or a 30-year fixed mortgage.
Fixed-rate mortgages are popular among borrowers because of their predictability. Since the monthly payments stay the same, budgeting won't be too much of a concern.
An adjustable-rate mortgage has a fixed interest rate for a certain period. For example, a 5/1 ARM has a set mortgage rate for five years. After that period ends, the rate will be adjusted annually.
In the beginning, the ARM rate is lower compared to fixed-rate mortgages. So, if you want to pay less during the first few years, this may be a good option for you. However, since the rate will be adjusted after the fixed-interest period, your monthly payments may increase significantly later on.
Mortgage refinancing refers to paying off your existing mortgage and taking out a new one. Most people refinance for the following reasons:
To take advantage of lower interest rates.
To convert from ARM to a fixed-rate mortgage (or vice versa).
To use their home equity to gain cash for an emergency.
To shorten their loan repayment period.
Today's Mortgage Rates In Illinois
Mortgage rates in Illinois trend slightly lower than the national average. To compare the mortgage rates for all types of loans, refer to the table below. We update the data daily, so bookmark this page to get the latest numbers.
Illinois Mortgage Rates
If you want personalized mortgage or refinance rates, use the calculator at the top of this page. Just enter your financial information, and it will automatically generate personalized Illinois mortgage rates.
Aside from the mortgage rate, our tools also show the annual percentage rate (APR). This refers to the mortgage rate plus other charges, like lender origination fees and points. The APR will give you a better idea of how much your mortgage payments will cost.
IHDA Mortgage Opening Doors Program: This lending program enables homebuyers in Illinois to get a 30-year mortgage with a fixed interest rate. It also gives them the opportunity to take out a second mortgage with a $6,000 DP and/or closing cost assistance.
SmartBuy: This program allows people in the state to get $5,000 that they can use to make a DP or cover closing costs. It also provides up to $40,000 in assistance for student loan relief. However, the student loan relief cannot exceed 15% of the home purchase price.
IHDAccess Forgivable Mortgage: Under this program, borrowers in Illinois can get up to 4% of the purchase price (up to $6,000) that they can use to pay the DP/closing costs. It will also be forgiven monthly over 10 years.
Steps To Buying Real Estate In Illinois
Whether or not you're a first-time homebuyer, the home buying process can be a little confusing. To help you understand how it works, follow the steps below:
Step 1: Evaluate Your Finances
The first step is checking if you're financially prepared to buy a property in the state. Here are some of the things you should consider:
Credit score: Ideally, you should have a credit score of 620 or higher. If you have less-than-ideal credit, you can try looking for government-insured loan programs that can help you.
Debt-to-income ratio: Most lenders prefer that you spend less than 36% of your income on debt, including your future mortgage payments.
Loan fees: Before you can close your mortgage, you'll need to pay origination fees to the lender. This can range anywhere from 3-5% of the loan amount.
Down Payment: Most lenders require at least 20% DP for conventional loans. If you're unable to make at least a 20% DP will need to pay private mortgage insurance (PMI). Another option is to go for homebuyer programs in the state.
Step 2: Choose A Lender
The next step is looking for a lender. To see which one can offer you the best deal, check our table on Illinois mortgage rates.
Once you've decided on a lender, send them your financial information and they'll respond to you with a preapproval letter. Having this document will show sellers that you're serious about buying a home in Illinois and that you can afford future payments.
Step 3: Look For A Realtor
Getting a local real estate agent will give you a real advantage when it comes to searching for properties in the state. They are familiar with home prices in Illinois and can give you advice on which properties you should consider based on your wishlist and budget.
Once you've found the ideal home, your real estate agent should also help you draft an offer. Depending on how many people are interested in the property, you may have to make an offer that's above the home price.
Step 4: Secure A Mortgage
After a seller accepts your offer, congratulations! Now, it's time to secure financing for your future home.
You can move forward with the lender who preapproved your loan or look for another one that will give you a better deal for your mortgage. Check our Illinois mortgage rate table again for more information on the latest rates. You can also use our personalized tools.
After you've chosen a lender in the state, submit a home loan application. The entire process can take up to a month to close.
Step 5: Conduct Inspections
It's wise to do an inspection before you close the deal on your new property. This will help you make sure that the home is in good condition.
For this, you can hire a professional inspector who will check the property's foundation, electrical system, HVAC, and plumbing. Aside from that, the state government recommends that you also do radon testing and termite inspection.
If anything unusual comes up during the inspection, you can renegotiate with the seller. You can ask them to lower the home price or cover the cost of repairs.
Step 6: Close The Deal
On closing day, you will be required to sign several documents related to the purchase transaction. In the state of Illinois, you need to ask a real estate attorney to look over the documents and represent your interests.
Once the papers are signed, you'll get the keys to your new home. Time to move in!
Tips On Getting Better Mortgage Rates
Home loans have two parts: the principal and the interest charged on the mortgage balance. So, if you want to save money on your home purchase, you need to try to lower the interest rates as much as possible.
Here are some ways you can achieve that goal:
Buy Discount Points
Discount points (or mortgage points) can be bought from lenders at 1% of the loan amount. So, if you borrow $100,000, for example, you pay $1,000 for every point.
Each of these points can lower your mortgage rate by 0.125% to 0.25%, depending on the lender. If you're taking out a mortgage with a long repayment term, such as a 30-year fixed loan, getting discount points can help you save money in the long run.
Improve Your Credit Score
Borrowers with good credit are considered low-risk and are generally rewarded with low APR or interest rates. To improve your score, you can do the following:
Pay your bills on time.
Pay down your credit cards and student loans.
Avoid closing bank accounts and credit cards.
Review your credit report and correct any outdated/inaccurate information.
Go For Shorter Loan Terms
Lenders offer lower interest rates to borrowers who choose shorter loan terms. Instead of choosing a 30-year fixed loan, for example, you can get a 15-year fixed mortgage.
Buying real estate in Illinois doesn't have to be difficult, especially if you follow the steps in this guide. With the help of our rate tools, you can find a lender that offers you the best deal on your mortgage.
For more information on mortgage rate trends in Illinois, get in touch with Wesley LLC! We'll help you compare APRs and loan terms to see which lender should be your number one choice in the state.