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The amount of closing costs to be paid on a Chicago home depends on the price of the property, where it resides, the loan product you choose, and much more. 

Below is a timeline of the costs you can expect to encounter, explanations of major items, and ball park estimates for each of them.

Due Upon Going Under Contract

Due Shortly After Under Contract

Due After Attorney Review

Due At Closing

The estimate you hear thrown around a lot is that you can expect to pay between 2 – 5% of the sale price – which isn’t exactly helpful!

Fortunately, there are online closing cost calculators available that will help you better nail down closing cost estimates relevant to the local market you are purchasing in.

Whether you use a calculator or not – your closing costs on a Chicago home will never come as a surprise. Lenders are required by law to provide an estimate of closing costs within three business days of receiving your loan application. 

Formerly called a Good Faith Estimate, a loan estimate form lists all the potential fees, deposits, and payments involved in the purchase of the home. The lender is also legally required to provide the actual numbers three business days before closing, so there will be no surprises then either.

Costs due upon going under contract  

1st Earnest Money Payment – Average Cost: 1% of sale price

Earnest money is what you pay after having an offer accepted to show your commitment to the home purchase. The amount is negotiable, and 1% of the sale price is typical. Earnest money stays in an escrow account kept by the seller’s agent, and will be issued as a credit during closing. 

Costs due shortly after going under contract 

Home Inspection – Average Cost: $406

While home inspections are not mandatory, they are HIGHLY recommended for buyers to get done prior to moving forward with their purchase. 

Inspections alert the buyer to any potential problems that need to be addressed prior to the sale, and also gives them an idea of what repairs may be needed in the future. A home inspection will typically take between 2 – 3 hours, and will focus on the following applicable areas:

  • Roof
  • Foundation
  • Plumbing
  • Site drainage
  • HVAC systems
  • Electrical
  • Chimneys
  • Decks and patios
  • Built-in appliances
  • Floors and ceilings

The buyer and seller come to an agreement about performing repairs, with the seller often giving the buyer a credit to take care of them – especially on issues that were unknown prior to the inspection. 

According to Manta.com, the average cost of a home inspection in Chicago in 2020 was $406, with the low end being $250 and the high end being $563. The cost can vary depending on the size of your home, and how many features it contains that warrant extra inspection, i.e a basement, septic system, swimming pool etc. 

Main Factors That Affect Price
  • Cost of labor – highly experienced inspectors cost more  
  • Cost of materials & equipment needed to perform inspection
Other Factors
  • Cost of any necessary inspection permits
  • Applicable Chicago building fees
  • General contractor fees – adds on average $54.81 to the total
  • Cost of sales tax on materials purchased 

Home Appraisal 

Average Cost: $321.57

A lender conducted home appraisal is mandatory if financing your purchase. Even if you are paying in cash, getting a home appraisal is still recommended, ( never overpay for a home!) Unlike inspections, appraisals are much less focused on the condition of a home, and more so on the value of the property based on its features, and an analysis of the surrounding neighborhood market. 

Buyers can expect to pay on average $321.57 for an appraisal on a Chicago single family home for sale.  

An appraisal is another bargaining chip in the negotiation for the buyer. If the seller is asking for more than the property is appraised for, the buyer can ask for a lower price, and will very likely get it. 

The reason for this is that around 88% of home buyers finance their purchase, and the amount lenders are willing to lend is based off of asset value, not the sales price. Unless the buyer can make up the difference in cash, the seller will have to come down on price to the buyer’s max loan limit. 


let’s say the sales price of a home is $638,000 and a conventional lender is willing to loan up to 80% of that number ( $510,400), requiring a 20% down payment from the buyer- $127,600

If the house appraises at $610,000, then the max the lender will approve them for is $488,000. If the buyer wants to go through with the purchase at the current price, their new down payment will be $150,000. 

Does the buyer have an extra $22,400 in reserves available in addition to all the other fees they need to pay at closing? Maybe, maybe not. Also, who wants to knowingly overpay for a home? Rather than take the risk of the deal falling through, most sellers in this situation would drop their asking price to the appraisal of $610,000. 

Note: Home Inspection & Appraisal bills can sometimes be delayed until closing, but usually are expected to be paid shortly after completion. Home Inspectors and Appraisers want to be paid right away, since if there are major problems that are revealed during their work – there may not be a closing at all. 

Condo Questionnaire

This cost applies to the purchase of condo units. The lender submits a questionnaire to the condo board or homeowners association to make sure other owners are paying their association fees and that the property is being properly maintained. This is a requirement by Fannie Mae and Freddie Mac before they will give government-backing to a loan. Some boards do not charge for their time in filling out the form but some may charge a fee of between $50 and $300.

Costs Due After Attorney Review Period 

The attorney period can last between 5-10 days. During this period your real estate attorney will review your contract and make any necessary adjustments to the legal language, and finalize any credits that the seller has agreed to after the results of the home inspection.

2nd Earnest Money Payment 

If a 2nd earnest money payment is required, it will typically be submitted after the attorney review period. The 2nd earnest money is usually around 5% of the total purchase price ( subtracting the 1st earnest money payment already made). The 1st and 2nd earnest money payment will be issued as a credit during closing. 

Costs Due At Closing 

Title Service Fees – Estimated Cost: $2,500 – $3,500

As Chicago Real Estate attorney Patrick Loftus explains, Title companies serve two functions during a closing:

1. To serve as the escrowee

The title company receives funds from the buyer and lender, and disperses them to the appropriate parties during the closing. 

2. Title Insurance

Title insurance ensures that the buyer has clear title to the property.

Lender Title insurance comes into play whenever you are getting a mortgage, and exists to protect your lender should someone try to place a claim on your new home.

Why would someone place a claim? One common possibility  is the existence of a lien. A lien is a claim on an asset that is used as collateral to satisfy a debt. If that debt obligation is not met, the lien holder can potentially seize the asset in question ( in this case your home!) 

Lien Examples
  1. Previous property owner did not pay property taxes
  2. Previous property owner did home repairs and never paid their contractor 
Other Possibilities
  • Errors in public record
  • Illegal deeds
  • Missing heirs
  • Forgeries
  • Undiscovered encumbrances 
  • Unknown easements
  • Boundary / survey disputes
  • Undiscovered will 
  • False impersonation of previous owner 

Check out First American’s handy  article to read up on these in more detail with examples included. 

In IL The title company issuing the lender insurance policy is picked by the seller’s real estate attorney. You’ll see a laundry list of line item fees charged by the title company. I’ve included many of the ones you will see below. Since I’m not a lawyer, I’m going to direct you to Patrick Loftus’s great blog post on the subject for explanations and cost estimates on some of the terms below. 

  • Lenders Title Insurance
  • Settlement / Escrow Fee 
  • IL Title Regulation 
  • IL Closing Protection Letter 
  • Gap Risk Update Fee 
  • Chain of Title 
  • Email Loan Package Fee
  • Endorsements 
  • Recording Service Fee
  • Overnight handling fee
  • Wire transfer handling fee 

You might be less concerned with the legal language, and more about the bottom line for your wallet. Either way – we’ve got you covered! For a fairly accurate breakdown of the closing costs, ask your Real Estate agent to check out CityWide Title Corporation’s C-PASS app. 

Local County Recording Fee

Average Cost$196 (Cook County) 

Recording fees will differ depending on which county the property resides in. I’m using Cook for this example. The recording fee goes to the Cook County Recorder to register the sale into the public record. Cook county has a flat rate that covers the vast majority of documents for $98. Typically, the buyer will only be expected to cover the recording of the conveyance deed, and the mortgage deed of trust. This would run you a total of $196.

As Erik Martin from The Mortgage Reports mentions, recording the sale is very important, as it establishes a public timeline for when you took ownership of the property. Courts will look at this timeline when resolving ownership disputes, should one arise. Lenders take recording very seriously, and won’t let you move in without it!

There are over 100 types of documents to be recorded – from those related to deeds, mortgages, foreclosures, licenses, easements, subdivision declarations and various fees. All the standard documents are covered by the flat $98 fee, whereas non standard documents are not covered. Documents defined as “non standard” are defined on the Cook County Recorder website, along with corresponding fees.

City of Chicago Transfer Tax

Cost – $3.75 per $500 of value

The City of Chicago charges a transfer tax for the privilege (their term) of transferring the title for property located in the city of Chicago. The rate is $3.75 per $500 of the transfer price. Back in 2008, the city imposed an additional tax of $1.50 per $500 of transfer price which goes to assist the Chicago Transit Authority. So in total, the tax rate is $5.25 per $500 of transfer price. The buyer pays $3.75 of this, and the seller pays $1.50.

Example: For a house that sold for $500,000, the buyer would pay $3,750 in transfer taxes.

Attorney Fees

A real estate attorney reviews the transaction documents and shows up for the closing. Lawyers help with contract negotiations and keep an eye out for any discrepancies in the closing documents. They alone have the power to make amendments to the legal language within your contract.

They will walk you through the paperwork and show you the many, many places you will need to sign. Yay, paperwork! Real estate attorneys typically charge between $450 and $700 for their services. 

Homeowners Insurance

Average Cost – $1042.

Homeowners insurance protects you against financial losses from the result of damage to your home. As Tanza Loudenback from Business Insider mentions, a home insurance policy is divided into two basic sections:

Section 1: this covers all the external and internal structures that make up your house, and personal belongings inside. 

Keep in mind, personal belongings  typically do not include pets, vehicles, or property of people renting a room in your home that aren’t related to you ( they need to purchase renters insurance to have their belongings covered). 

Section 2: this covers personal liability for anyone who gets injured on the property, and would help cover their medical bills. 

The average cost of homeowners insurance in Illinois per year is $1042.  It is expected that the buyer will buy one years’ worth of homeowner’s insurance, due at closing. To do a deeper dive on  home insurance, check out this great article by Investopedia. Talk to your insurance agent and make sure you understand exactly what the policy you end up purchasing is covering. 

Escrow Accounts

If your down payment is less than 20% of the property value, it’s very likely your lender will require you to fund an escrow account and pre- pay portions of your property tax and home insurance upfront. 

Failure to pay property taxes could result in the property being seized by the local taxing authority, and failure to pay home insurance could result in a lapse in coverage and a huge loss for the lender in the event of home damage. Your lender badly does not want either of these things to happen, so they make sure to cover their butt in those areas. 

Since property tax and home insurance rates are subject to change, you may receive a refund at the end of the year from your lender if you paid more than necessary – or a bill if rates were increased and your account is short. 

Property Tax Escrow

Cook County sends out property tax bills twice per year, on August and March 1st. Your lender will pay both of these bills for you from the escrow account which you fund. 

The amount of property tax you are required to put in your escrow account at closing will be affected by the month of your closing and when the next tax bill is due. For example, if you closed on March 1st and your next property tax bill was due on August 1st, a lender may want you to fund 10 months of property taxes into the escrow account, even though there are only 5 months in between March and August. 

The exact amount of extra “cushion” they require will depend on your financial status, and their discretion. 

Home Insurance Escrow 

In addition to the one year of home insurance already paid to your insurance company, your lender will want some extra reserves here to cushion the account. It’s typical for 2- 3 months of next year’s payment to be required to fund the escrow account at closing. 

Going forward, you can expect the normal monthly amount to be rolled into your regular mortgage payment. 

Property Tax Proration ( Seller Credit) 

In Chicago, property taxes are paid the year after they are issued. Because of this, the buyer will pay the taxes from the period where the previous owner lived in the property when the next property tax bill comes due. Don’t worry! The seller will be issuing you a credit for this during closing, so it will be coming out of their pocket. 

Loan Origination Fee

The buyer can also expect to pay a fee to the lender for underwriting their loan. Underwriting involves the research process of analyzing the borrower’s income, credit history, debt, assets, and the property purchase in question, and determining if they are of acceptable risk to receive a loan. 

Typically, lenders will charge somewhere between 0.5 – 1% of the total loan amount for an origination fee. 

Loan Processing Fee

Processing fees are usually in the ballpark of $300- $1,500, depending on the lender. 

The loan processor reviews all of the financial documentation the underwriter has collected during their research process, organizes it, verifies it for accuracy and makes sure it is up to the standard that the lender requires. If there are missing documents, or additional documents are needed, it is the loan processor that will typically contact the borrower. 

Discount Points

Paying discount points is also an option, where you pay more interest upfront to get a lower mortgage rate, and therefore a lower monthly payment. As Sarah Cain mentions from Bankrate, Typically one discount “point” will equal 1% of the total loan amount, and will lower your interest rate by .25% 

Is paying points worth it? Cain says that in general the longer you plan on staying in the home, the more likely it is that your interest savings will be greater than the discount points you paid upfront to reduce your rate.

You can analyze whether paying discount points makes financial sense by using Bank Rate’s mortgage points calculator. This will help you find your “Break-Even” point, and figure out how many years you will have to live in your home in order to realize the savings. 

As a last note, buying points may not be worth it if you are putting less than 20% down and have to pay PMI, (private mortgage insurance) in addition to your regular principal and interest payments. 

As you can see, there are a lot of variables to consider here. If you can afford to hire a financial advisor, you should do so, as this will likely be one of the biggest purchases in your lifetime. A financial advisor will open your eyes to all the options you have in front of you, and give an unbiased assessment of the implications of choosing one path over another. 

Prepaid Interest 

At closing, you have to pay the interest on your mortgage upfront for the days remaining in the month. For example, if you closed on August 12, you would have to pre pay the daily interest owed from August 12 – Sept 1st. 

Since interest payments are made at the end of the month ( in arrears), as opposed to at the beginning ( in advance), you would not owe your next mortgage payment until October 1st. 

Mortgage Insurance Premiums / Private Mortgage Insurance 

FHA – A mortgage insurance premium will be due at closing with an FHA loan, and will be equal to 1.75% of the total loan amount. 

Conventional – If you are getting a conventional loan and putting less than 20% down, you will be required to pay private mortgage insurance. Your lender gives you the option to pay your PMI upfront at the closing, or roll it into your monthly mortgage payments. 

As Crissinda Ponder from Lending Tree explains, one advantage of paying your PMI upfront is that you won’t have to remember to request a cancellation for it later once you reach 78% LTV   ( loan-to-value) like you would if you paid it monthly. 

Cons? Besides the fact that you have to pay more upfront at closing, if you decide to refinance your mortgage, or sell your home – you will lose the money you paid up front for PMI. 

Down Payment 

Last, and definitely not least -your down payment is due at closing, and can vary greatly depending on what type of loan product you have selected. 

Conventional – Typically conventional lenders want a down payment of at least 20% of the asset value you are purchasing, due at closing. 

If you are planning to put down less than 20%, they will add PMI, or “Private Mortgage Insurance” which is a premium that will be rolled into your monthly loan payments. For PMI, typically you can expect to pay somewhere between 0.5 – 2.25% of the loan value on an annual basis, depending on your credit and income qualifications. 

If the lender does not require you to pay PMI for a down payment of less than 20%, they will very likely be charging you a higher interest rate to compensate them for the increased risk of granting you a highly leveraged loan. 

FHA – You can typically expect a down payment of between 3.5% to 10% on an FHA loan, depending on your credit. Don’t forget about the 1.75% mortgage premium that is also due! To learn more about FHA loans, check out the “Loan Products” section on my financing tips blog post here.

VA – These loans are backed by the department of Veterans affairs. If you or your spouse served in the military, you can potentially get a 0% down payment! To learn more about the qualifications needed for a V.A loan, give the loan products section on my financing tips article  another quick read.

Be Prepared

This covers the most common closing costs buyers can expect to pay on a home in Chicago. There are many variables – the biggest one being the sale price and the down payment. As with anything in life, it’s good to err on the side of caution. Better to overestimate than underestimate. 

A Real Estate agent can recommend a mortgage broker, home inspector and real estate attorney to work with. Remember, these people and companies work for you so feel free to ask them any questions that will make you more comfortable in your home buying process.

If you have further questions that I can answer about the closing process, or Chicago Real Estate in general, just reach out!

Need help estimating closing costs on your next Chicago home? Send me a message!