Mortgage Guide for Illinois
Illinois carries one of the highest effective property tax rates in the nation at 2.23%, making monthly escrow a dominant factor in mortgage qualification and payment sizing. The state's transfer tax structure layers state, county, and in Chicago a substantial municipal tax, creating closing cost variability that depends heavily on where in Illinois a property is located. The sharp divide between the Chicago metro market and downstate Illinois produces two distinct mortgage landscapes within a single state.
Mortgage Numbers for Illinois
| Median Home Price | $250,000 |
|---|---|
| Baseline Conforming Limit | $806,500 |
| Conforming Limit Ceiling | $806,500 (standard) |
| FHA Loan Limit (Baseline) | $524,225 |
| Avg. Property Tax Rate | 2.23% |
| Avg. Homeowners Insurance | ~0.30% of home value (avg. annual premium) |
| Transfer Tax | 0.10% (Illinois imposes a state real estate transfer tax of $0.50 per $500 ($1.00 per $1,000, or 0.10%). Cook County adds $0.25 per $500. Chicago layers a municipal transfer tax of $3.75 per $500 ($7.50 per $1,000), bringing the combined rate in Chicago to approximately $11.50 per $1,000 (1.15%) . Outside Cook County, only the state portion applies unless a municipality has enacted its own transfer tax.) |
| High-Cost Counties | No |
Data sources: FHFA (conforming limits), HUD (FHA limits), U.S. Census (home values), State Department of Revenue (property tax). Updated annually unless noted. Data as of 2026-02-21.
What This Means for Your Mortgage
Property Taxes Dominate Monthly Payments
Illinois has an effective property tax rate of approximately 2.23%, placing it among the two or three highest-taxed states in the country . On a $250,000 home, that translates to roughly $5,575 per year, or $465 per month added to your mortgage payment through escrow. When lenders calculate your debt-to-income ratio, this property tax burden counts heavily against your qualifying income. Even at moderate home prices, the high tax rate means a larger share of each monthly payment goes to escrow rather than principal and interest, effectively reducing the loan amount a borrower can qualify for compared to lower-tax states. Property taxes in Illinois also vary dramatically by county, township, and taxing district. Suburban Cook County communities routinely see effective rates exceeding 2.5%, while some rural downstate counties have rates closer to 1.5% .
Conforming Limit Headroom and Loan Type Distribution
All 102 Illinois counties use the baseline conforming loan limit set by FHFA of $806,500 for a single-unit property. With a statewide median home price of approximately $250,000, most Illinois borrowers have substantial headroom below the conforming limit, meaning conventional loan pricing is available for the vast majority of purchases. However, the Chicago metro area, particularly the North Shore suburbs and western suburbs like Hinsdale and Naperville, includes neighborhoods where purchase prices regularly exceed $800,000. Buyers in those markets may need jumbo loan financing, which typically requires higher credit scores, larger down payments, and more reserves. Downstate markets almost never approach conforming limit territory. The FHA loan limit floor of $524,225 applies to all Illinois counties, providing ample coverage for FHA borrowers across the state.
Transfer Tax Layering: State, County, and Municipal
Illinois imposes a state real estate transfer tax of $0.50 per $500 of the sale price, which equals $1.00 per $1,000 (0.10%). Outside Cook County, this is the only transfer tax on most transactions. Within Cook County, an additional county transfer tax of $0.25 per $500 applies. Chicago adds a municipal transfer tax of $3.75 per $500, bringing the combined rate in the city to approximately $11.50 per $1,000 (1.15%). On a $400,000 condo purchase in Chicago, that totals approximately $4,600 in transfer taxes alone. This layered structure makes closing costs in Chicago significantly higher than in downstate markets, where the same $400,000 purchase would incur only $400 in state transfer tax. A small number of other Illinois municipalities, including Evanston and several Chicago suburbs, have also enacted local transfer taxes . Buyers should confirm the exact transfer tax structure for their specific municipality before estimating closing costs.
The Cook County Assessment System
Cook County uses a classification system for property tax assessment that differs from the rest of Illinois. Residential property in Cook County is assessed at 10% of fair market value, while commercial and industrial properties are assessed at higher percentages . The rest of Illinois assesses all property uniformly at 33.33% of fair market value. This classification system means that Cook County homeowners' assessed values appear lower on paper, but the tax rates applied (expressed in mills or per-dollar rates) are correspondingly higher to generate the same revenue. The practical effect for mortgage borrowers is that the actual tax bill, not the assessment percentage, determines the escrow amount. Lenders calculate escrow based on the most recent actual tax bill or a projected bill for new construction. Buyers in Cook County should pay close attention to whether the property's most recent assessment reflects current market conditions, as reassessment cycles can produce sudden increases in tax bills that change the monthly payment after closing.
IHDA Programs Target First-Time and Income-Qualified Buyers
The Illinois Housing Development Authority (IHDA) administers several homebuyer assistance programs that can significantly reduce upfront costs for qualifying borrowers. IHDA's primary product line, IHDAccess, offers down payment and closing cost assistance in three structures: forgivable (no repayment after a compliance period), deferred (no payments until sale or refinance), and repayable (monthly payments over 10 years). The forgivable option is the most popular, providing up to $6,000 in assistance that is forgiven ratably over the compliance period . Most IHDA programs require completion of a HUD-approved homebuyer education course and have income and purchase price limits that vary by county. With Illinois property taxes consuming a large portion of monthly payments, IHDA's down payment assistance can be especially valuable in freeing up cash that would otherwise be stretched thin by high escrow obligations.
Insurance Costs Are Moderate
Illinois homeowners insurance averages approximately 0.30% of home value annually. On a $250,000 home, that translates to roughly $750 per year, or $63 per month in escrow. While this rate is near the national average, Illinois faces weather risks including tornadoes, severe thunderstorms, and winter ice damage. Portions of the state along the Mississippi, Illinois, and Ohio rivers, as well as the Lake Michigan shoreline, may fall within FEMA-designated flood zones requiring separate flood insurance. The 2024 and 2025 flood seasons in the Midwest have prompted some carriers to adjust premiums in river-adjacent areas . Buyers along major waterways should verify flood zone status and factor potential flood insurance into their affordability calculations.
What This Means for Your Monthly Payment
On a $250,000 Illinois home with 10% down ($225,000 loan) at a 6.5% interest rate, estimated monthly costs break down as follows: principal and interest of approximately $1,422, property tax escrow of approximately $465, homeowners insurance of approximately $63, and PMI of approximately $94 (assuming a 0.5% PMI rate). The total estimated monthly payment is approximately $2,044. The property tax component alone accounts for roughly 23% of the total payment, which is among the highest proportions of any state. In Chicago, add the higher closing costs from layered transfer taxes to your upfront budget. PMI rates vary by credit score, loan-to-value ratio, and insurer, so your actual cost may differ from this estimate. Using the affordability calculator with Illinois defaults will provide a personalized estimate based on your income, debts, and target location within the state.