You might be closer to buying a home than you think. Here’s what 3%, 5%, 10%, and 20% down actually look like.
One of the most common misconceptions about buying a home is that you need to save 20% of the purchase price before you can qualify for a mortgage.
You don’t.
In Illinois, some conventional loans allow down payments as low as 3%.
FHA loans can require as little as 3.5%. Some lenders also offer down payment assistance that can potentially cover the entire 3.5% requirement through a second loan.
Certain government-backed programs offer eligible buyers the opportunity to purchase with no down payment.
The amount you’ll need depends on your loan program, finances, and the property you’re purchasing.
How Much Is a Down Payment on a House?
Your down payment is the portion of the purchase price you pay upfront rather than finance through your mortgage.
For example, if you’re purchasing a $400,000 home with 5% down:
- Purchase Price: $400,000
- Down Payment (5%): $20,000
- Mortgage Amount: $380,000
Here’s how different down payment percentages compare across three purchase prices.
| Down Payment | $300,000 Home | $400,000 Home | $500,000 Home |
|---|---|---|---|
| 3% | $9,000 | $12,000 | $15,000 |
| 3.5% | $10,500 | $14,000 | $17,500 |
| 5% | $15,000 | $20,000 | $25,000 |
| 10% | $30,000 | $40,000 | $50,000 |
| 20% | $60,000 | $80,000 | $100,000 |
These figures represent the down payment only, not the additional costs associated with purchasing a home.
What Is the Minimum Down Payment in Illinois?
There isn’t one universal down payment requirement.
Different mortgage programs have different minimums.
Conventional Loans: As Low as 3% Down
Certain conventional mortgage programs allow qualified buyers to purchase with as little as 3% down.
On a $400,000 home, that’s $12,000.
Conventional loans aren’t limited to first-time homebuyers, although eligibility for particular low-down-payment programs may depend on income, credit, occupancy, and other factors.
FHA Loans: As Low as 3.5% Down (Potentially $0 Out of Pocket)
FHA loans are government-insured mortgages that can offer more flexible qualifying requirements.
The standard minimum down payment is 3.5% for eligible borrowers.
However, some lenders offer financing programs that can help buyers cover that down payment through a second mortgage.
One of my lending partners, Eduardo Carmona, is a Chicago-based mortgage loan consultant who helps qualified buyers explore 0% down payment and potentially $0 cash-to-close financing options.
For example, on a $400,000 home:
- Purchase Price: $400,000
- FHA Down Payment Requirement: $14,000
- Potential Second Loan: $14,000
- Buyer’s Own Down Payment Funds: Potentially $0
The second loan may cover the down payment requirement, allowing an eligible buyer to purchase without contributing their own funds toward that portion of the transaction.
Depending on the financing program, available credits, and other assistance, some buyers may qualify for a transaction requiring $0 cash at closing.
Important: A 0% down payment and $0 cash to close aren’t necessarily the same thing. Closing costs, prepaid expenses, repayment terms, and eligibility requirements still matter.
These options are subject to lender approval and program availability. The specific terms of Eduardo’s program should be confirmed directly with him.
FHA loans require mortgage insurance, so compare the total monthly cost against conventional financing.
VA Loans: Potentially 0% Down
Eligible veterans, active-duty service members, and certain surviving spouses may qualify for VA-backed financing without a down payment.
On a $400,000 home, that could mean financing the full purchase price.
VA loans generally don’t require monthly mortgage insurance, although other fees and eligibility requirements may apply.
USDA Loans: Potentially 0% Down
USDA financing may allow qualified buyers to purchase eligible properties with no down payment.
These programs have income, location, and occupancy requirements.
They’re generally designed for eligible rural areas, so availability depends on where you’re purchasing.
How Much Are Closing Costs When Buying a Home in Illinois?
Your down payment isn’t the only money you’ll need to purchase a home.
Closing costs are the additional expenses associated with completing your real estate transaction.
For planning purposes, buyers can use approximately 2%–5% of the purchase price as a broad starting estimate, although actual costs vary significantly depending on the loan, property, location, and negotiated terms.
Here’s what that looks like:
| Purchase Price | 2% Closing Costs | 5% Closing Costs |
|---|---|---|
| $300,000 | $6,000 | $15,000 |
| $400,000 | $8,000 | $20,000 |
| $500,000 | $10,000 | $25,000 |
These are illustrative estimates, not guaranteed closing-cost amounts.
What Do Closing Costs Include?
Depending on your transaction, closing costs may include:
- Lender Fees: Loan origination, underwriting, processing, and other financing charges.
- Appraisal: An independent evaluation of the property’s value, generally required by the lender.
- Attorney Fees: The cost of legal representation throughout the transaction.
- Title and Recording Fees: Charges associated with title services and recording ownership documents.
- Transfer Taxes: Applicable state, county, and municipal taxes allocated according to local requirements and the purchase agreement.
- Prepaid Expenses: Homeowners insurance, prepaid mortgage interest, and property tax escrow deposits.
In Chicago, buyers generally pay a municipal transfer tax of $3.75 per $500 of the purchase price, equivalent to 0.75%.
On a $400,000 home, that’s $3,000.
Other transfer taxes may be paid by the seller under the customary allocation, subject to the contract.
What Does This Mean for a Buyer Putting 5% Down?
Let’s use a $400,000 Chicago home as an example.
| Expense | Estimated Amount |
|---|---|
| Purchase Price | $400,000 |
| Down Payment (5%) | $20,000 |
| Estimated Closing Costs (2%–5%) | $8,000–$20,000 |
| Estimated Total Cash Needed | $28,000–$40,000 |
The closing-cost estimate includes applicable transfer taxes and other estimated charges; those items should not be added again.
Any earnest money already deposited would generally be credited toward the amount due at closing.
Seller credits, lender credits, and eligible assistance programs could also reduce the amount of cash the buyer needs to bring.
The takeaway? A 5% down payment doesn’t necessarily mean you only need 5% of the purchase price saved.
Before making an offer, ask your lender for an estimate of your total cash to close.
Do You Have to Put 20% Down on a House?
No.
But here are the advantages to putting more money down.
A larger down payment generally means you’re borrowing less, so you’ll typically pay less in interest over time.
On many conventional mortgages, putting at least 20% down also allows you to avoid private mortgage insurance (PMI).
However, putting 20% down isn’t automatically the best financial decision for every buyer.
Consider two buyers purchasing identical $400,000 homes.
Buyer A: 5% Down
- Down Payment: $20,000
- Mortgage: $380,000
- More savings potentially available after closing.
- Typically pays PMI.
Buyer B: 20% Down
- Down Payment: $80,000
- Mortgage: $320,000
- Lower mortgage balance.
- Typically avoids PMI.
Buyer B puts an additional $60,000 into the property upfront.
That can create meaningful monthly savings.
But Buyer A may prefer to retain more cash for emergencies, renovations, investments, or other financial priorities.
The goal isn’t necessarily to put the most money down. It’s to choose a down payment that works for your financial situation.
Does Illinois Offer Down Payment Assistance?
Yes.
The Illinois Housing Development Authority (IHDA) offers mortgage programs that can help eligible homebuyers with down payments and closing costs.
Depending on the program, assistance may be provided through a forgivable loan, deferred-payment loan, or repayable loan.
Examples of IHDA’s published assistance programs include:
- Access Forgivable: Up to $6,000 in assistance, forgiven over 10 years if program conditions are met.
- Access Deferred: Up to $7,500 in assistance through a deferred-payment loan.
- Access Home: Up to $15,000 in assistance for eligible first-time buyers and certain qualifying exceptions.
- Access Repayable: Up to $10,000 in assistance through a repayable loan.
Program offerings, amounts, and availability can change. Confirm current terms with IHDA or a participating lender.
These programs have income limits, purchase-price limits, credit requirements, and other eligibility rules.
Some also require buyers to contribute a minimum amount of their own funds.
Down payment assistance doesn’t always mean free money.
Some programs require repayment when you sell, refinance, or pay off your mortgage.
A participating lender can help determine which options are available and whether you qualify.
Should You Wait Until You Have 20% Saved?
Not necessarily.
Waiting could give you more time to save, strengthen your credit, and reduce your future monthly mortgage payment.
But waiting also means delaying your purchase.
Home prices, mortgage rates, rents, and your personal circumstances can change in the meantime.
Rather than choosing a down payment percentage first, I recommend working backward from three questions:
- What monthly housing payment are you comfortable with?
- How much cash can you contribute without draining your savings?
- Which mortgage programs are available to you?
A lender can compare different scenarios so you understand the monthly payment, mortgage insurance, closing costs, and cash required.
The Takeaway
You don’t need 20% down to buy a home in Illinois.
Depending on your financing, you may qualify with 3%, 3.5%, 5%, or even 0% down.
But qualifying for a mortgage and being financially comfortable with that mortgage are two different things.
The best down payment isn’t always the biggest one. It’s the one that gets you into the right home without putting unnecessary pressure on your finances.
Make Every Move Count. Ryan Lehrman
Frequently Asked Questions
Can I buy a house in Illinois with 3% down?
Yes. Certain conventional mortgage programs allow qualified buyers to purchase a home with as little as 3% down. Eligibility depends on the loan program and your financial circumstances.
How much is 3.5% down on a $300,000 house?
A 3.5% down payment on a $300,000 home is $10,500. Additional closing costs and prepaid expenses may apply.
Do first-time homebuyers need 20% down?
No. First-time buyers may qualify for conventional loans with as little as 3% down, FHA loans with 3.5% down, or certain zero-down-payment programs.
Can I buy a house with no down payment in Illinois?
Potentially. Eligible buyers may qualify for VA or USDA financing that doesn’t require a down payment. Some FHA financing arrangements may also offer assistance through a second mortgage that covers the required down payment.
Does Illinois have first-time homebuyer assistance?
Yes. IHDA offers several mortgage assistance programs. Some are specifically designed for first-time buyers, while others may be available to repeat buyers who meet program requirements.
What happens if I put less than 20% down?
With many conventional loans, you’ll generally pay private mortgage insurance until you meet the applicable cancellation requirements. FHA loans have different mortgage insurance rules.
Is earnest money the same as a down payment?
No. Earnest money is a deposit made during the purchase transaction. It’s generally credited toward your down payment or other closing costs when the transaction closes.
Can I use gift money for my down payment?
Often, yes. Many mortgage programs allow eligible gift funds from approved sources, subject to documentation and lender requirements.
Is it better to put 5% or 20% down?
It depends on your savings, monthly payment goals, mortgage insurance costs, and other financial priorities. A lender can show you both scenarios so you can compare the total cost.
Are closing costs included in my down payment?
No. Closing costs are separate expenses associated with completing your purchase. Some assistance programs, seller credits, or lender credits may help cover eligible costs.
How much cash do I need to buy a $400,000 home in Chicago?
With 5% down, the down payment would be $20,000. Using a broad 2%–5% closing-cost estimate, total cash needed could be approximately $28,000–$40,000 before accounting for earnest money already paid, credits, or assistance.
