How Much Money Do You Really Need to Buy Your First Home in Chicago?

One of the biggest reasons first-time buyers delay purchasing a home is a simple assumption:

“I need 20% down before I can buy.”

The good news?

That isn’t necessarily true.

Depending on your mortgage program and qualifications, you may be able to purchase a home with as little as 3% to 3.5% down. Some Illinois buyers may also qualify for programs that help with their down payment and closing costs.

So, if you’re hoping to buy your first home in Chicago, you may be closer than you think.

Let’s break down how much money you may actually need—and where that money goes.

First, Let’s Get Rid of the 20% Down Myth

You do not automatically need a 20% down payment to purchase a home.

There are mortgage programs designed specifically to make homeownership more accessible.

Depending on your qualifications, options may include:

• Conventional mortgages with as little as 3% down
• FHA financing with a minimum 3.5% down payment
• Down-payment assistance programs
• Programs that allow certain gift or grant funds to be used toward your purchase

For example, Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs offer eligible borrowers down-payment options as low as 3%.

Putting down 20% can have advantages, but waiting until you’ve saved that amount isn’t always necessary.

What Would a 3% Down Payment Actually Look Like?

Let’s say you’re purchasing a home for $300,000.

A 20% down payment would be:

$60,000

That’s the number that makes many potential buyers think homeownership is years away.

But a 3% down payment would be:

$9,000

And a 3.5% FHA down payment would be:

$10,500

That’s a very different savings goal.

Of course, the down payment isn’t the only money you’ll need, but understanding this difference can completely change how you look at buying your first home.

So What Else Do You Have to Pay For?

There are several upfront expenses first-time buyers should prepare for.

Let’s break them down.

1. Your Down Payment

Your down payment is the portion of the home’s purchase price that you pay upfront.

How much you’ll need depends on your mortgage program, financial situation and lender requirements.

For a $300,000 home, for example:

3% down: $9,000

3.5% down: $10,500

5% down: $15,000

10% down: $30,000

20% down: $60,000

You and your lender can determine which financing option makes the most sense for your situation.

And remember: the smallest possible down payment isn’t automatically the best option.

You also want a monthly mortgage payment that fits comfortably into your budget.

2. Closing Costs

Closing costs are separate from your down payment.

They can include expenses associated with your mortgage and transaction, such as:

• Loan-related fees
• Appraisal
• Title-related charges
• Prepaid taxes
• Homeowners insurance
• Escrow funding
• Other settlement expenses

Freddie Mac advises buyers that closing costs commonly run approximately 2% to 5% of the purchase price, although the actual amount varies by transaction.

For a $300,000 home, 2% to 5% would equal approximately:

$6,000 to $15,000

Before panicking at that number, keep reading.

There may be ways to reduce how much of that comes directly out of your pocket.

3. Earnest Money

When your offer is accepted, your contract may require an earnest money deposit.

Think of earnest money as a good-faith deposit showing the seller that you’re serious about purchasing the property.

Freddie Mac notes that earnest money may commonly be around 1% to 2% of the home’s purchase price, although the actual amount is determined by your particular transaction and contract.

Here’s something important:

Earnest money generally isn’t an extra fee on top of everything else.

When the transaction closes, it can typically be credited toward the money you’re required to bring to closing.

Your real estate professional and attorney can explain exactly how your earnest money will be handled under your contract.

4. Home Inspection

Once you’re under contract, you’ll usually want to have the property professionally inspected.

This is money well spent.

A home inspector can help identify concerns involving areas such as:

• Roof
• Foundation
• Plumbing
• Electrical systems
• Heating and cooling
• Windows
• Basement or crawl space
• Appliances
• Exterior

Freddie Mac gives a general estimated inspection cost of approximately $300 to $500, although pricing can vary depending on the property, location, inspector and additional services you request.

You may also choose additional inspections depending on the property.

5. Appraisal

If you’re financing the home, your lender will typically require an appraisal.

The appraisal helps the lender determine whether the property’s value reasonably supports the purchase and loan amount.

Your lender should explain whether your appraisal fee is paid upfront or included with other loan-related costs.

6. Homeowners Insurance

Your lender will generally require homeowners insurance before your loan closes.

The amount you pay will depend on factors such as:

• Property
• Location
• Coverage
• Deductible
• Insurance company

Don’t wait until the day before closing to shop for insurance.

Comparing quotes early can make the process much smoother.

7. Don’t Forget Your Emergency Fund

This is one of the most important parts of the conversation.

Having enough money to close doesn’t necessarily mean you have enough money to comfortably own the house.

I don’t recommend thinking about your home purchase as:

“How can I put every dollar I have into closing?”

Think about what happens after closing, too.

Homes come with expenses.

A furnace can stop working.

An appliance can break.

You may need a plumber.

You may discover something you’d like to repair immediately.

Ideally, you want to keep some money available after closing instead of completely draining your savings.

A Realistic $300,000 Example

Let’s put everything together.

Imagine you’re buying a $300,000 home using a mortgage that requires 3% down.

Down payment

Approximately $9,000

Estimated closing costs

Approximately $6,000–$15,000, using the general 2%–5% range.

Inspection

Potentially several hundred dollars, depending on the property and services.

That doesn’t mean you’ll necessarily need the entire amount in cash.

Why?

Because there may be assistance programs, negotiated credits, gift funds or other options depending on your mortgage and transaction.

This is why I encourage buyers to speak with a knowledgeable lender before assuming they can’t afford to buy.

Illinois Buyers May Have Down-Payment Assistance Options

This is especially important for Chicago-area buyers.

The Illinois Housing Development Authority (IHDA) currently offers programs that can assist eligible buyers with down payment and closing costs.

As of 2026, IHDA lists programs including:

Access Forgivable

Offers eligible buyers 4% of the purchase price, up to $6,000, toward down payment and closing costs. The assistance is forgiven monthly over 10 years.

Access Deferred

Offers eligible buyers 5% of the purchase price, up to $7,500, as an interest-free loan that is generally deferred until the home is sold, refinanced or the mortgage is paid off.

Access Repayable

Offers eligible buyers 10% of the purchase price, up to $10,000, as an interest-free loan repaid monthly over 10 years.

IHDA states that these programs have eligibility requirements involving factors such as household income, purchase-price limits, credit, homebuyer counseling and buyer contribution requirements. Programs are available statewide, including Cook County.

Programs and eligibility requirements can change, so always verify current terms with an approved participating lender before making financial decisions.

You May Still Need Some of Your Own Money

Down-payment assistance doesn’t necessarily mean buying a house with absolutely nothing in the bank.

For the IHDA Access programs, for example, buyers are currently required to contribute at least $1,000 or 1% of the purchase price, whichever is greater, along with meeting the program’s other requirements.

That’s another reason it’s helpful to start planning early.

Even if you aren’t ready today, you can create a realistic savings goal.

Can Your Family Help With Your Down Payment?

Possibly.

Some mortgage programs allow eligible gift funds to be used for a down payment or closing costs.

For example, Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs allow qualifying funds to come from certain gifts, grants and other approved sources.

However, mortgage rules regarding gifts and documentation are specific.

Don’t simply deposit a large amount of money into your bank account without discussing it with your lender.

Your lender can explain how gift funds need to be documented.

What About Private Mortgage Insurance?

Another reason people hear that they need 20% down is private mortgage insurance, commonly called PMI.

With many conventional mortgages, putting less than 20% down can mean paying mortgage insurance as part of your monthly payment.

That doesn’t necessarily make buying with less than 20% a bad decision.

It simply needs to be included when you’re determining what monthly payment you can comfortably afford.

Freddie Mac notes that conventional buyers putting less than 20% down will typically pay PMI until they have sufficient equity, subject to applicable requirements.

Don’t Start With the House. Start With the Numbers.

Here’s something I want every first-time buyer to understand:

Getting pre-approved doesn’t mean you have to spend the maximum amount you’re approved for.

Suppose a lender says you qualify for a $350,000 home.

That doesn’t automatically mean you should buy a $350,000 home.

Your budget should still leave room for:

• Utilities
• Groceries
• Transportation
• Savings
• Retirement
• Entertainment
• Vacations
• Home repairs
• Emergencies
• Your actual life

Your goal shouldn’t just be to become a homeowner.

Your goal should be to become a homeowner without becoming house-poor.

So How Much Should You Save Before Calling a Realtor?

You don’t have to wait until you’ve reached some magical savings number before starting the conversation.

In fact, talking to a real estate professional and lender earlier can help you determine what that number should be.

You may discover:

“I’m ready now.”

Or you may discover:

“I need six months to improve my credit and save another $5,000.”

Both are valuable answers.

Once you know where you stand, you can stop guessing and start planning.

The Bottom Line

So, how much money do you really need to buy your first home in Chicago?

Probably less than the 20% down payment you may have been imagining.

For qualified buyers, mortgage options with down payments as low as 3% or 3.5% exist, and eligible Illinois buyers may have access to programs that help with down payment and closing costs.

The exact amount you need will depend on:

• Home price
• Loan program
• Credit profile
• Income
• Property taxes
• Insurance
• Closing costs
• Available assistance
• The specific property you choose

That’s why the best first step isn’t necessarily saving another $20,000.

It may simply be finding out where you stand.

Thinking About Buying Your First Home in Chicago?

If you’ve been renting because you assumed you don’t have enough money to buy, let’s find out what your options actually look like.

I can help you understand the homebuying process, connect you with lending resources, and help you explore homes throughout Chicago and the surrounding suburbs that fit your goals and budget.

You don’t need to be ready to make an offer tomorrow.

You just need a starting point.

Let’s turn “Can I afford to buy?” into a real plan for homeownership. 🏡🔑

Bettina Yarbrough | BettinaTheRealtor
Helping Chicago-area buyers navigate homeownership with confidence.

This article is for general educational purposes and is not financial, lending, tax, or legal advice. Mortgage programs, rates, assistance programs and eligibility requirements can change. Consult qualified lending and financial professionals regarding your individual situation.