Buying a home can be complicated. Before you invest time and money in a new home, you should understand how the homebuying process works.
- For a quick overview of the homebuying process, watch the videos on the Illinois Housing Development Authority’s website.
- You can also check out the U.S. Department of Housing and Urban Development’s (HUD) Buying a Home and Home Economics brochure.
Know your rights
Read HUD’s Fair Housing pamphlet to learn about the Fair Housing Act and your rights as a potential homeowner.
Budget for buying a home
When planning to buy a home, it is very important to have a budget and to stick to it. Make sure that you consider how much money you can afford to spend on a home right now, rather than how much money you hope you can spend in the future.
Getting a loan to buy a home
A loan to buy a home is also called a mortgage. A mortgage sale has 3 sides:
A bank lends money to the buyer, who pays the seller. Then the buyer pays the bank back over the next 15 years or so.
Getting a mortgage from a bank or mortgage lender helps you demonstrate that you can pay for a home. Mortgages differ based on several factors like how long it will take to pay back the loan and the interest rate. Some mortgages are insured by state or federal governments and may have lower credit standards than loans made by a private company. These lower credit standards may be beneficial for some buyers. There are a wide variety of lenders that offer mortgages to buyers but beware, some lenders use deceptive and fraudulent practices that can have bad consequences for buyers. This is called predatory lending.
- HUD’s Shopping for a Loan provides information on the mortgage buying process
- You can check current mortgage interest rates at Bankrate
- Use HUD’s Predatory Lending: Illinois page for resources to help avoid becoming a victim of predatory lending
- Here is a list of government insured mortgage programs
Using a contract for deed
A contract for deed is a way to buy a house. It’s an alternative to a mortgage sale usually because the buyer can’t get a mortgage. A contract for deed is between a buyer and a seller. The buyer pays the seller for a number of years. Once the contract has been paid off, the seller gives the buyer a title to the property.
If you fall behind on the payments for your contract for deed, the seller can evict you if you owe more than 80% of the original purchase price. If you owe less than 80% of the original purchase price then the seller must file a foreclosure case. The original purchase price is the total amount the buyer agreed to pay for the house.
Illinois law protects home buyers more than tenants. Home buyers are given chances to catch up on their payments so they can avoid losing their home. When facing foreclosure, buyers have at least 90 days to catch up on missed payments and stop the foreclosure. Otherwise, a foreclosure takes at least 7 months.
Searching for a home
Use HUD’s Home-shopping checklist to keep track of what you’re looking for in a home.
Use this realtor site to find a list of houses for sale in Illinois.
While generally not required, a home inspection by a qualified professional can reduce a buyer’s risk of purchasing a house with problems. Some houses have termites or mold that could cause structural or health problems. A home inspection gives a buyer a better idea of the condition of the home they are looking into. In most cases, it is the buyer’s responsibility to find and pay for a home inspection. In Illinois, home inspectors must be licensed by the State.
These organizations can help you find a home inspector:
To find out if a home inspector has an active license use the Illinois Department of Financial and Professional Regulation’s License Lookup.
HUD provides a list of 10 important questions to ask your home inspector.
Making an offer on a home
When you have decided on a house that you would like to purchase, the next step is to make an offer to the seller. Upon receiving an offer the seller can do a few things including:
- Reject your offer,
- Accept your offer, or
- Make a counter-offer.
In the case of a counter-offer from the seller, the buyer must then decide whether or not they will accept the new terms.
Close the deal on your new home
The closing is when when it comes time to finalize the purchase of your new home. Make sure you read all of the paperwork very carefully. If possible, you should have a lawyer look at the papers before you sign them.
Getting help with the home buying process
Find a Homeownership Assistance program in your area. Homeownership Assistance programs are provided by the government and can help you with the process of buying a home. Do your own internet searches to find other programs that might be in your area but not listed on the site above. For example, in western Cook County, there is the West Cook Homeownership Center and the West Cook Housing Collaborative.
Housing counselors are available in certain areas to give advice on buying a home. Use one of these websites to find a housing counselor near you:
A title is proof of legal ownership in a home or property. Sometimes there are problems with certain titles. Common mistakes with a title are unpaid taxes, liens, mortgages, and restrictions on the property. Title insurance protects buyers from these problems. Lenders usually require the buyer to purchase title insurance.
Title insurers are required to be licensed in Illinois, use the Illinois Department of Professional and Financial Regulation website to check a license.
For more information on buying title insurance visit HUD’s Securing Title Services webpage.
Homeowner’s insurance protects you financially from theft, fire, storms, and other events that cause damage to your home. Each homeowner’s insurance policy will list what type of damage it projects or covers.
Most homeowner’s policies do cover damage from:
- Fire and lightning damage
- Theft and vandalism damage
- Smoke damage
- Storm damage
Most homeowner’s policies do not cover damage from:
- Termites or other insects
- Normal use of your home or property
Homeowner’s insurance can also include coverage for:
- Other buildings on your property
- Personal property such as clothing, furniture, and appliances
- Loss of use which pays some expenses while your house is being repaired
- Personal liability which pays some legal expenses
- Medical payments if someone got hurt on your property
One of the most important parts of homeowner’s insurance is the amount of coverage you are getting. If your home is insured for $100,000, this is the most you will be able to get from the insurance company if your home is destroyed. If you have have homeowner’s insurance, the amount of coverage on your home is listed on the first page of your insurance policy, called the declarations page. Make sure your total coverage is enough to rebuild your home if it is totally destroyed.
Generally, the person purchasing the house is responsible for getting homeowner’s insurance. Most mortgage lenders require homeowner’s insurance before they will give out a loan.
The Illinois Department of Insurance has information for shopping for homeowner’s insurance.
Use the Federal Emergency Management Agency’s (FEMA) National Flood Insurance Program site for flood risk and insurance premium estimates and additional information on flood insurance.
Taxes for home or property
In Illinois, counties and cities collect property taxes for a variety of reasons. Property taxes are usually due the year after they are assessed. For example, taxes assessed on a property in 2016 will be paid in 2017. Unpaid taxes on a property can cause issues during the home buying process. Purchasing title insurance may protect buyers against unpaid taxes also known as delinquent taxes.
The Illinois Department of Revenue has an overview of property tax.
You can also use the property tax estimator to find the average price of taxes in your county.
Problems with neighbors or disputes
Disputes with the people we live around can happen for a variety of reasons including noise, cleanliness, and security. While it depends on the nature of the dispute, a good and inexpensive option is to meet with the neighbor, discuss the problem, and try to reach a solution. If finding a solution is unsuccessful, another option is to take part in an alternative dispute resolution process such as mediation. Bringing a legal action against a neighbor is a potential solution but may be more expensive and time consuming.
Home improvement issues with contractors
It’s best to get any agreement for a home improvement project in writing. If a contractor you hire to perform work on your house is taking actions that you don’t agree with, the first thing to do is to inform them of the problem before they continue, preferably in writing. If a resolution cannot be reached and depending on the nature of the dispute, homeowners may be able to file a complaint with the Illinois Attorney General’s Office. Contacting a lawyer may also be appropriate.
The Illinois Attorney General's Office has more advice on home repair and construction.