Chicago is a fantastic city, filled with historic sites, modern attractions, deep cultural roots, and diverse cuisine. The homebuyer process in Chicago is an exciting one, but understanding what’s involved is helpful. Detailed information will guide you to make a decision, ensuring a successful purchase.
Understand the Local Real Estate Market
The current Chicago market is competitive. Homes receive 2 offers on average and sell typically within 69 days. Median home prices are around $335,000, down 2.9% since last year. The median price per square footage is $236, down 4.1% since last year. This means now is an excellent time to be a buyer.
Establish a Budget and Secure Financing
A home is a major expense. You will need to decide how much you can afford considering the down payment, closing costs, insurance, and other fees. You must also think about ongoing expenses such as mortgage, property tax, maintenance, and repairs.
Getting pre-approved by a lender before house hunting is a must. A pre-approval lets you know how much you can afford to spend on a home. It also tells sellers that you’re serious about buying and have the finances to move forward. A letter of approval is expected when making an offer.
There are several online calculators you can use to determine how much of a home you can afford. 28/36 is a good rule of thumb. It states that you shouldn’t spend more than 28% of your gross income on home-related costs, nor should you accrue more than 36% in total debts.
Various loan types are available to buyers:
- Conventional Loans: A conventional loan is any type of loan not insured or guaranteed by the government. You will need a decent credit score to qualify. Down payments can be as low as 3% but the lower your down payment, the higher your ongoing payments will be.
- FHA Loans: Federal Housing Administration (FHA) loans make buying a house more affordable for low- and moderate-income individuals. They offer interest rates as low as 3.5% and competitive interest rates.
- Local Mortgage Programs: There are several local mortgage programs aimed to help Chicago homebuyers. For example, First Time Homebuyers offers several programs that provide down payment and closing cost assistance.
Choosing the Best Neighborhood for You
Selecting the right neighborhood is extremely important, since location is key when buying a home. The city is filled with great neighborhoods, but finding one that suits your unique lifestyle, budget, and preferences is vital.
Chicago neighborhoods that are currently trending include:
The Loop-Downtown Chicago: So-named for the L that forms a rectangular loop around the area, this downtown neighborhood is traditionally known as the city’s financial district. The Loop is home to numerous high-rise office buildings. However, there is a growing trend in 2023 towards converting some of these business buildings into residential spaces, making it an increasingly attractive option for potential homebuyers. The Loop is perfect for people who want to be close to work and enjoy the downtown lifestyle.
West Loop: The West Loop within the Chicago Near West area is a Chicago neighborhood well known for its emerging high-rise buildings and trendy restaurants.
River North, Gold Coast, and Streeterville: This section, Near North, is just north of downtown. It features a mix of high-rises, townhouses, and single-family homes. It is home to a variety of food and shopping destinations.
Tips to consider when selecting the neighborhood:
- Visit the neighborhood at different times of the day: This will give you an idea of what the area is like in the morning, afternoon, evening, and night.
- Check local amenities: Walk or drive around the neighborhood to see what’s nearby in terms of food, restaurants, shops, and more.
- Review nearby schools: If you have children, find out what the schools in the area have to offer.
Assemble Your Homebuying Team
An important part of the buyer process is assembling your home buying team. You will need a real estate agent, a mortgage broker, an inspector, and a real estate attorney.
Real Estate Agent: Finding an agent that is the right fit for you is important. The agent you work with should be attentive to your needs and communicate with you continuously throughout the process. They should have a deep knowledge of the market and demonstrate how they will strive to make every step of the process as easy and stress-free as possible, from the first consultation through closing.
Ask questions to assess their expertise and personality before moving forward.
Mortgage Broker: A mortgage broker will help you find a home loan. You can find a mortgage broker by looking at reviews and asking for referrals. Your realtor should be a great resource for lender referrals.
Inspector: Once your property is under contract, an inspection is required. The inspection often occurs within the 1st five days after agreeing to terms for purchase. There are several great home inspectors to select from, however if you need further referrals, ask you realtor.
Real Estate Attorney: The state of Illinois uses real estate attorneys for closing. Once again, your realtor should have several referrals for an attorney.
House Hunting in Chicago
Once your team is assembled, your realtor will start sending you properties that meet your needs. You can also start your own search by checking local active home listings.
When you find homes you are interested in, have your realtor schedule a private showing or attend an Open House.
Once “the home” strikes you, move forward and make an offer. Your realtor will help you with an offer price by looking at comparable properties in the area that are active, under contract or have closed in the recent past. If it’s a buyer’s market you may be able to negotiate a discounted price, if it’s a seller’s market you may be facing a multiple offer situation and therefore, may have to increase your offer.
Once you find the perfect home, negotiating a deal with the seller can be complex and buyers need to be savvy negotiators. Here is a guide for the negotiation process with critical steps to help in getting the home of your dreams.
Closing the Deal
- A mortgage or deed of trust that shows you are putting up the home as collateral for the loan.
- A closing disclosure that outlines the fees and costs of the loan
- A settlement statement that details the financials of the transac8on.
You will also do a final walkthrough before closing. This allows you to confirm that everything is in the same condition as it was when you agreed to buy the home. You can also inspect it to make sure the agreed-upon repairs have been made.
Once the closing is complete, you’re ready to move in. Moving can be overwhelming, but you can make it easier by keeping everything organized in labeled boxes.
Settle into your new home by cleaning everything before you unpack. Get familiar with the floor plan by figuring out where your outlets and circuit boxes are. Walk around the neighborhood to get acquainted with your surroundings.
I Can Help
It is best to work with an experienced Chicago real estate agent to help you through it all. I would like to be part of your team. I won’t give up until I’ve found you a place you can proudly call home.