Illinois mortgages: property taxes, exemptions and IHDA help

#Illinois property taxes by the numbers

The Census Bureau’s ratio of median taxes paid to median home value puts Illinois at 1.92%, the highest of the 50 states and DC, against 0.89% nationally. The median Illinois homeowner pays $5,399 a year, even though the median home is worth less than the national median.

On a home at the state’s median value, that ratio means about $5,389 a year, or $449 a month. The same home taxed at the US ratio would owe $2,498 — a difference of $2,891 a year. Bills are set locally: counties, townships, school districts, municipalities and special districts each levy on the equalized assessed value (EAV), so rates vary sharply even within one county. Ask for the last two tax bills on any home you consider, because the current owner’s exemptions are built into them.

#How property tax shrinks an Illinois budget

Now work backward from income. Illinois’s median household income of $83,211 is above the US figure, and Freddie Mac’s guideline of keeping housing under 30% of gross income gives $2,080 a month. At Illinois’s tax ratio that budget supports about $242,000 with 10% down — $38,700 below the median home value. At the national ratio, the same budget would stretch to $269,000. The higher tax costs a median-income buyer about $27,000 of buying power. Buying the median home on these terms takes an income of roughly $96,500.

The affordability calculator shows the effect for your own income, and the payment calculator lets you enter the actual tax bill of a home you are considering.

#Illinois homestead exemptions you need to claim

Illinois exemptions reduce the EAV your tax rate is applied to, so their value depends on your local rate. The main ones for buyers:

At an example combined rate of 7% of EAV, the $6,000 general exemption saves $420 a year and Cook County’s $10,000 saves $700. The Illinois Department of Revenue also lists exemptions for veterans with disabilities, people with disabilities and homes rebuilt after a natural disaster. Apply through your county assessor’s office after you close, and check the first bill to confirm they were applied.

#IHDA down payment assistance

The Illinois Housing Development Authority offers several down payment assistance options with its first mortgages through participating lenders. All of them require a 640 minimum credit score and homebuyer education, and income and price limits vary by county.

On the median $280,700 home, 6% works out to $16,842, above the $15,000 cap, so the assistance tops out at $15,000 — enough to cover the 3.5% minimum down payment on an FHA loan ($9,825) with the rest going to closing costs. IHDA notes that funding can change at any time and is not guaranteed until a lender reserves it. Compare these with grants and tax credits in the first-time buyer programs guide.

#Transfer taxes: state, county and city

Illinois charges a state real estate transfer tax of 0.1% of the price — about $281 on the median home. Counties can add their own transfer tax, and home-rule municipalities can add more on top, so the total depends on the address — Chicago, for one, adds its own. Who pays each piece depends on the ordinance and your contract. Together with lender, title and recording costs, closing costs usually fall in the CFPB’s 2%–5% range — $5,614–$14,035 on the median home. The closing cost estimator starts from the state tax.

#Housing age, and Chicago next to the state

Illinois has the 7th-oldest housing in the country by median build year, so budget for inspections of roofs, wiring, plumbing and basements. In Chicago the median value is above the state median, the effective tax rate is lower than the state ratio, and most Chicago households rent. The Chicago market guide covers the city’s transfer tax and local programs.