- Buying a home in Illinois requires the use of escrow, and it is similar to other states that use an attorney review. A real estate attorney will be used to complete the transaction and prepare all the necessary documents.
- There will also likely be an attorney-review period at the start, which is usually five (5) days. This will be completed before the contract is finalized.
- In Illinois, the purchase will be completed at the closing table (also called a “settlement table”) at which both the buyer and seller will be present.
Phase 1: The Attorney Review with Inspections and Possible Credits
Once a buyer is on contract with a seller, these are the initial steps. Usually they can be completed alongside Phase 2.
- An offer will need to be accepted by the seller and a contract will be signed. This launches the attorney-review process if required in the contract. Either party can exit the deal at this point without penalty.
- At the same time, a deposit, also called “earnest money,” will be paid to the buyer’s attorney or broker.
- The buyer will now have a chance to sign off on any disclosures. The disclosures will always vary, but they usually include flaws to the property that are known by the current owner. They can also include previous repairs and potential environmental hazards presented by the home or property. Seller will disclose these flaws and factor them into the asking price, which means they may not agree to credits or price reductions caused by the flaws because, in their mind, they have already been worked in.
- The buyer now has a chance to perform inspections as they see fit. The inspections will need to be completed by a certain date, which is known as the inspection-contingency date. The buyer can choose a wide variety of inspections if they desire, but they will often include a general inspection by a licensed contractor and an inspection for lead paint and asbestos, as well as other potential toxins.
- The next step will depend on the results of the tests. If everything checks out, the buyer and seller can move forward. However, if the inspections reveal any issues with the home, the buyer can request repairs, closing-cost credits, or a reduction in the sale price. The sellers can then respond in kind. They can either agree to all the buyer’s requests, offer a modified solution, or decline the buyer’s requests entirely. In response, the buyer can accept, continue with negotiations, or leave the deal without any financial penalty.
- The buyer also has a chance to negotiate a home warranty, covering major appliances from failure. This usually covers appliances for roughly a year.
- The inspection contingency is now removed by the buyer. If they fail to make an inspection response to the seller by a certain date, they have effectively waived the inspection contingency.
Phase 2: Securing the Mortgage Loan for Buying a Home in Illinois
Most people buying a home in Illinois will need a mortgage loan. Unfortunately, securing the loan can be one of the most complex and detailed phases of the entire process. Therefore, it’s best to start as early as possible and collect as much information as you can. When buying a home in Illinois with the use of a mortgage loan, these are some of the basic steps:
- The first step will be to submit a mortgage-loan application to your lender. You can do this through your broker or directly to the lender.
- After three days or less, you should receive a GFE, for “Good Faith Estimate.” This is a breakdown of the estimated costs for closing the loan, and it will likely vary slightly from the final price.
- Before you can make an offer on a home, you will need to be pre-approved for a loan. To complete this step, you will have to bring a wide variety of information to the lender. This information will include documents related to your credit, income, and debts, such as:
– Several months’ worth of bank statements, including any and all accounts that you currently own.
– If you have outstanding loans, lines of credit, or any other financial liabilities, bring at least two months of information on these items. This should also include rent payments if you have any.
– Up to two years of tax returns, which can be ordered through the IRS using IRS Form 4506-T.
– Bring information from your work, including recent pay stubs and any contact information from the employer. The amount of pay stubs will vary so ask your lender.
– Information related to your overall financial situation. This can include anything that increases or reduces your monthly expenditures. For example, if you pay or receive child support or divorce alimony, make sure it is included. If there is something that impacts the money you have on hand, include it in your documents.
– You should include an explanation of any recent credit inquiries.
– Information related to large deposits, especially any gifts. While gifts are great for funding a down payment or closing costs, they present difficulties for lenders. In many cases, you’ll have to bring a “gift letter” from the donor, which explains the nature of the deposit, contact information for the donor, as well as information stating the money is a gift and not a loan, and will therefore not require repayment. The amount that triggers a gift-letter requirement will depend on the size of the gift compared to your annual income. Ask your lender if a gift letter or further information is required in regards to one or more of your large deposits.
– If requested by the lender, you may also need to bring repeated or updated documentation for any of the above information. Lenders take on a lot of financial risk when they write loans, so they may require multiple verifications of certain points, including information on your income or debt load. Your lender may ask for updated pay stubs, rent receipts, and bank statements. If there is any changes in the content of these documents, the lender may be forced to reassess your loan.
- The lender will eventually have to render a decision. Assuming you are approved for the mortgage loan, you will be issued a loan commitment letter, which basically says that you have been approved for a loan once certain conditions are met. These conditions can include an appraisal so the lender can confirm the value of the property, as well as a requirement that no material changes are made to your financial situation.
- A financing contingency will be removed by the buyer before the loan-contingency date, which is defined in the contract. The buyer may ask the seller for an extension to their loan contingency if they have not yet received their letter. In Illinois, the buyer will have to submit the request for an extension in writing, and the seller has to set a specific number of days to respond if they don’t want to allow for the extension period.
- The lender or mortgage broker will now order an appraisal on the property. This is done through a directory of appraisers, and while they cannot request the appraiser of their choice, they can request a different one if the appraiser does not meet their needs. (They simply can’t order the appraiser of their choosing.) If the appraisal comes in low, the lender can decline the loan unless a change is made, such as modification to the home or a reduction in the sale price.
- The homeowner will now need to purchase homeowner’s insurance. In some cases this is supplied by organizations, such as an HOA; if this is the case you don’t need to order insurance. You may also need to order title insurance before the loan is written.
As we discussed above, this can be a lengthy, complicated process, so it’s best to start early. You may find that the process is overly complicated and focused on insignificant details, but remember that lenders need as much information as possible to reduce their financial risk. It’s in their best interest to be meticulous, but once the process is complete you’ll have a loan that helps you finance a home you’ll love for decades. Be sure to avoid any changes in your financial situation during this time. Even positive changes, such as a job with a pay increase, will cause the mortgage-approval process to halt, and even reset. Avoid new jobs, new lines or credit, and leasing vehicles until the process is complete and buying a home in Illinois will be much easier.
Phase 3: The Closing Process in Illinois
When you are buying a home in Illinois, the closing process will take place at a single table where all parties will sign the appropriate documents. The location of the closing is usually the office of an attorney or the title company. Once all the documents have been signed, buyers will be able to take possession of the home. However, there may be a contingency that allows the seller to stay in the property for a certain period.
While the closing process is faster than most other phases, there are some steps to remember, including:
- A title search will be conducted before the closing to make sure there are no liens or assessments against the property. Assuming the title is clear, the closing can proceed as planned. Remember that the buyer can ask for the title search in advance of closing the deal; if the search reveals any issues, they can request changes to the price or the contract itself.
- It’s now time for the buyer’s attorney to go to work. The buyer’s attorney will begin preparing the paperwork for the title and deed, and will file an application for title insurance if required by the lender.
- A final closing date will now be scheduled.
- A cash figure for the buyer is calculated. This is the amount the buyer will need to bring in a cashier’s check to the closing meeting. It is based on a mortgage closing cost as well as property taxes and other figures.
- A final walkthrough of the property will be scheduled. This will be performed before the final closing to verify the condition of the property.
- At the closing table, the buyer and seller will sign the appropriate documents for transferring a home in Illinois.
- The buyer will now pay the remaining fund for the down payment (a cashier’s check) to the attorney or representative of the title company.
- The representative or attorney will record the transaction and deed with a city or county.
- Congratulations! You will now receive the keys to your new Illinois home and, assuming there are no delays, take complete possession of the property!
This is an informational document meant as a general guide, and should not be taken as legal, financial, or real-estate advice. Always talk with a professional before making any decision on property or mortgages.
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I had the pleasure of working with Chads team. Everything went as planned. I was very pleased. I still want to take them to dinner. I am completely enjoying my new home”
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