Believe it or not, closing costs are one of the biggest reasons potential homeowners will shy away from buying a home. It’s hard to save up that large sum of money purchasing a home requires, and even more difficult if you have any debts or bills. Not including your down payment, closing costs can include-e many different fees and payments that are usually out of your control

The average price of a home in Illinois is around $225,000 and since most lenders say that closing costs will be 2-3% of the sale price, you can expect them to be between $3,000-$8,000. Statistics show that millennials today have more debt than ever and a payment of that much would deplete their entire savings account.

The charges you can expect to see on your Closing Disclosure (document your lender must provide within three days of closing outlining the costs of the transaction) may vary depending on the type of mortgage you are seeking. The most common charges will be the application fee, appraisal fee, attorney fees, closing or escrow fees, title and insurance premiums, taxes, mailing, and recording fees.

Breaking Down the Fees

Application Fee – While it might seem stingy to charge for an application, the cost is used to help prepare your loan for the next steps. Sometimes lenders will waive this fee and you should ask ahead of time if there is one. It’s important to communicate and start the homebuying process on a good note.

Appraisal Fee – Most lenders will outsource the appraisal to a trusted third party and this fee is to cover the cost. On the bright side, you’ll have an accurate value on the property you want to purchase.

Attorney Fees – Depending on what state you live in; an attorney could be involved in the process to validate documents. However, in Illinois one is not required to use a lawyer for the purchase agreement, only to review the final purchase agreement before signing. Naturally, there is a fee here.

Closing or Escrow Fees – There is a third party involved in facilitating the title insurance and closing for all parties involved.

Escrow Deposits – Taxes and Insurance make up a healthy chunk of your overall mortgage payments – most lenders will require you to have at least a couple of months’ taxes and mortgage insurance payments made as you’re approaching closing.

Mailing Fees – The name says it all. Lenders will have to mail paper documents to you, the bank, and other third parties – there are small fees associated with this.

Recording Fees – These are fees associated with the county you live in. They will require a fee to record your deed.

On top of the fees listed, there can be even more costs depending on the type of home loan you’re after.

If you’re hoping to live in an area where it rains a lot – you could be in a flood zone and required to purchase additional insurance.

You might also have to pay for a home inspection. This is separate from the appraisal and good reassurance that all the home’s appliances are in working order. This fee will vary based on the size of the home and what’s on the inside.

The fees will feel never-ending, but don’t panic – everything will be presented to you upfront on your closing disclosure. Lenders are required by law to provide an itemized list of all the costs and fees throughout the homebuying process.

Therefore, buying a home without any assistance can feel impossible.

Luckily, mortgage lenders realize this and have worked with Government Sponsored Entities (GSE’s) like Fannie Mae and Freddie Mac to provide closing cost assistance through different mortgage programs. While these products are mainly designed to help with down payments (which you might also need), they ultimately assist with closing costs.

First, it’s best to understand how GSE’s work. Their primary goal is to provide liquidity, stability, and affordability to the mortgage market. They buy mortgages from lenders and either save purchased mortgages in their portfolio or package loans into mortgage-backed securities (MBS) that can be sold. MBS packaging guarantees timely payment of the principal and interest on underlying mortgages to the GSE’s. This attracts secondary mortgage market investors, which helps provide and expand available housing to those who wouldn’t invest in mortgages. Talk with your lender to learn more about the programs they offer with GSEs.

Another option you can take advantage of is home loans through the Illinois Housing Development Authority (IHDA). Similar to GSE’s, they operate through approved lenders like us! They’ve designed programs to help potential buyers anywhere in Illinois. Read below to learn about some of the different assistance programs they offer.

1st Home Illinois

The 1st Home Illinois program combines a 30-year fixed-rate mortgage with the option of up to $7,500 in down payment and closing cost assistance. To be eligible, you must finance as a conventional, FHA, VA, or USDA loan and not have owned a home in the last three years. Buyers must also meet credit and income requirements while contributing 1% of the purchase price of $1,000 (whichever is greater) to the transaction. The home must be a primary residence and to complete the program, borrowers must go through an online homeownership counseling course.

IHDAccess Forgivable

The Access Forgivable mortgage provides 4% of the purchase price up to $6,000 in assistance for the down payment and closing costs. The funds are considered a gift and are forgiven monthly over ten years. The program is designed as a 30-year fixed-rate mortgage and is available to both first-time and repeat homebuyers across Illinois. Borrowers can finance this mortgage as an FHA, VA, USDA, or FNMA HFA Preferred. Both newly constructed and existing homes are eligible for financing. To be considered eligible, borrowers must have a minimum credit score of 640. Borrowers are also required to invest $1000 or 1% of the purchase price (whichever is greater) towards the transaction. Borrowers must complete homeownership counseling before they close. These programs are offered online or in-person and under certain circumstances, borrowers can be exempt from the course.

IHDAccess Deferred

The Access Deferred mortgage provides 5% of the purchase price up to $7,500 in financial assistance for the down payment and closing costs. The financial assistance is offered as an interest-free loan and is deferred through the life of the mortgage. Borrowers will not need to repay the $7500 until they sell, refinance, or pay off the mortgage. The program is designed as a 30-year, fixed-rate mortgage and is available to both first-time and repeat homebuyers across Illinois. Borrowers can finance this mortgage as an FHA, VA, USDA, or FNMA HFA Preferred. Both newly constructed and existing homes are eligible for financing. To be considered eligible, borrowers must have a minimum credit score of 640. Borrowers are also required to invest $1000 or 1% of the purchase price (whichever is greater) towards the transaction. Borrowers must complete homeownership counseling before they close. These programs are offered online or in person. Under certain circumstances, borrowers may be exempt to complete the course.

IHDAccess Repayable

The Access Repayable mortgage provides 10% of the purchase price up to $10,000 in financial assistance for the down payment and closing costs. The financial assistance is considered an interest-free loan and is repaid monthly over 10 years. The program is designed as a 30-year, fixed-rate mortgage and is available to both first-time and repeat homebuyers across Illinois. Borrowers can finance this mortgage as an FHA, VA, USDA, or FNMA HFA Preferred. Both newly constructed and existing homes are eligible for financing. To be considered eligible, borrowers must have a minimum credit score of 640. Borrowers are also required to invest $1000 or 1% of the purchase price (whichever is greater) towards the transaction. Borrowers must complete homeownership counseling before they close. These programs are offered online or in person. Under certain circumstances, borrowers may be exempt from the course.

If you’re a visual learner – check out this video from one of our Loan Officers, breaking down a real world scenario of how interest rates impact your mortgage. (Embed video) https://www.youtube.com/watch?v=Ru6PeBYs9aE

If you’re interested in selling a home in Illinois but are worried about the costs connected to it – Check out this article from Clever.com – it provides in in depth breakdown of the different fees associated with selling a home in Illinois. https://listwithclever.com/real-estate-blog/the-average-cost-of-selling-a-home-in-illinois/

There are many different mortgage programs out there that your lenders will look at to find the one that best fits your needs. It’s important to ask any questions and make sure they address any concerns you have. If you have any questions or would like to get started with one of the home buying programs above, reach out to Neighborhood Loans to begin the process.

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