Buying a home in Chicago: property taxes, transfer taxes and payments

#Chicago’s property tax weight

Chicago’s effective property tax rate of 1.51% is the highest among the 20 large cities we cover. Illinois as a whole ranks highest of all states at 1.92%, so the city is lower than the state ratio and well above the national 0.89%. On the median-priced home, that difference from the US ratio works out to $2,115 a year more in tax.

The median Chicago owner pays $5,152 a year. Bills come from the Cook County assessment and the rates of every local body that taxes the property, minus any exemptions you file for. Before you bid, pull the latest bill for the specific property rather than relying on a citywide figure, and ask a lender to escrow at that amount.

#Chicago, Illinois and the US side by side

Most Chicago households rent: 46.5% of occupied homes are owner-occupied. The median home is above the Illinois median and below the national one, and it costs 4.2 times the median household income.

The median home was built in 1954, the third-oldest housing stock among the cities we cover. Older two-flats, bungalows and vintage condos can carry repair costs a payment estimate won’t show, so budget for the inspection findings.

#Monthly payment: 10% conventional vs 3.5% FHA

FHA needs $22,178 less cash up front, at the cost of a higher monthly bill and an annual premium that lasts for the life of the loan unless the starting loan-to-value is 90% or less. The FHA base loan of $329,258 is below the national FHA floor limit of $541,287, so it fits under the FHA limit in any county. Compare the two in detail in the FHA loans guide, or run your numbers in the payment calculator.

#Chicago’s transfer tax: city portion and CTA portion

Chicago levies its own real property transfer tax in two parts, on top of the state’s 0.1% and Cook County’s own tax:

The city portion is a buyer cost, so add it to your cash-to-close estimate along with the down payment, lender fees and prepaid items. Buyers aged 65 or older who live in the home for at least a year can get the CTA portion refunded on transfers of $250,000 or less. The median-priced home is $91,200 above that limit, so the refund applies mainly to lower-priced homes. The closing cost calculator adds lender fees and prepaid items to the state tax.

#How far the median Chicago income goes

The median Chicago household earns $80,613. At Freddie Mac’s 30% housing guideline that is $2,015 a month, enough for about $244,000 with 10% down at today’s rate and the city’s tax ratio — $97,200 less than the median value. To carry the median home within the guideline you would need about $113,000 a year. Each $10,000 of price adds roughly $74 a month in loan payment and property tax. The affordability calculator runs the same math with your debts.

#City of Chicago homebuyer resources

The Chicago Department of Housing lists several routes for buyers: TaxSmart, the City’s federal mortgage tax credit for qualified buyers (see mortgage credit certificates); Building Neighborhoods and Affordable Homes, for newly built affordable homes in targeted areas; the Chicago Housing Trust’s affordable ownership homes; and counseling at HUD-approved housing counseling centers. Terms and funding change during the year, so confirm current availability with the department. Statewide IHDA programs are covered in the Illinois guide.

Chicago’s older neighborhoods also see basement and sewer-backup flooding after heavy rain. That damage is usually excluded from standard policies unless you add coverage, and homes in FEMA high-risk flood zones with federally backed loans need flood insurance. For other big-city comparisons, see New York City and Atlanta, or test renting against buying with the rent vs buy calculator.