Illinois Mortgage Rates

Anyone who has made the decision to purchase a home knows that mortgage rates greatly affect one’s ability to buy the house of one’s dreams. However, not everyone takes the time to understand how mortgage rates are determined. For the most part, mortgage rates are based on the bond rate of a ten-year treasury bond. Since the average 30-year mortgage is either paid off or refinanced within the first ten years of its lifespan, the ten-year Treasury bond is the best benchmark. In simple terms, the mortgage interest rate is approximately 170 points (or 1.7 percent) above the ten-year Treasury bond rate. If the bond rate is 3.00, the mortgage rate will be 4.70, or 4.7 percent.

This thumbnail calculation only provides a base mortgage rate. Other factors included in an individual mortgage rate are one’s credit history, employment history, income, housing market trends, value and condition of the property under consideration, and a host of other situation-specific conditions. Individuals should take into account any additional fees, charges, and loan covenants prior to signing any loan documents. An individual must shop around to determine which financial institution offers the best rate to suit his needs.

National and Illinois Mortgage Rates

In order to simplify comparisons, all rates are quoted for a thirty-year fixed-rate mortgage. Within the past year, average national mortgage rates have reached a low of 4.24 percent in October and a high of 5.10 percent in April, according to information gathered by the Federal Home Loan Mortgage Corporation (Freddie Mac). Freddie Mac contacts 125 lenders of various types each week (mortgage brokers, commercial lenders, savings and loans) on a weekly basis to determine this national monthly average. According to these figures, the average national mortgage rate was 4.69 percent for the year. The current average mortgage interest rate in Illinois stands at 5.25 percent.

Real Estate Prices

The average national selling price for a single-family home ranged from $248,200 in October to $284,100, according to the US Census Bureau. The average selling price for the past year was $290,900. According to the Illinois Association of Realtors, the median price of a single-family home for the past year was $145,000.

Factors Affecting Real Estate Prices

Location is the single most important factor in determining real estate prices. A home’s location comprises several factors – its physical location, its location relative to conveniences or privacy, and its location relative to an area of economic stability. One could build a million-dollar mansion located next to the train tracks in a slum, but it is likely that he would never recover his costs if he chose to sell his home. The average selling price for the homes in his immediate location will be far lower than the price he paid for his home. Additionally, external factors such as the noise from the train will decrease the value of his property. Theoretically, if the individual had incredible foresight, and built his mansion in a slum that was scheduled for a community revitalization project, he could recover substantially more of his costs, as the average price for a home would rise significantly as a result of the revitalization. However, such revitalization could take years, and may not have enough of an impact on prices to justify the initial cash outlay.

The same theory applies to purchasing existing single-family dwellings. Location is the most important factor in determining the value of the home. Homes located in thriving neighborhoods are worth more than homes located in slums. Homes located near institutions of higher education such as colleges and universities are worth more than other homes, as the average education level and income of such homeowners tends to be higher than homeowners in other areas. In short, desirable neighborhoods create high property values.

Illinois Neighborhoods


According to the Illinois Association of Realtors, homes in the Chicagoland Primary Metropolitan Statistical Area sell for a median of $187,750 – more than $40,000 above the state’s annual median. Mortgage interest rates range from 4.7 percent to 5.2 percent. Part of the reason for this disparity in median home selling price is the innovative Affordable Chicago Five Year Plan. By combining the efforts of government, nonprofit organizations, and community leaders, Chicago has galvanized its forces in a massive community revitalization project. This Plan includes attracting new business into the area, providing affordable housing to all income levels, creating livable communities for seniors, and rebuilding neighborhoods through the conversion of vacant lots into affordable housing or business opportunities. All of these factors combine to render Chicago an excellent housing location.

McLean County, Bloomington

According to the Illinois Association of Realtors, homes in the McLean County Area sell for a median of $169,000, which is up 16.6 percent from last year’s median County home price, and nearly $30,000 above the state’s annual median. Mortgage interest rates range from 4.7 percent to 5.2 percent. The City of Bloomington created a strategic plan designed to earn it the moniker of “The Jewel of Midwest Cities”. One goal of the City’s Strategic Plan is to upgrade the city’s infrastructure. This vital improvement will attract new business into the city and improve the quality of life for its business and residential customers. The neighborhood revitalization program brings together knowledgeable and experience individuals from all walks of life to ensure that Bloomington remains a desirable location in which to purchase a home. A third prong of the Strategic Plan offers tax incentives to businesses that choose to relocate into the City. Additional businesses will provide additional jobs, raising the standard of living and the housing values for all of Bloomington.

St. Clair County, East St. Louis

According to the Illinois Association of Realtors, homes in the St. Clair County Area sell for a median of $135,000, which is up 12.5 percent from last year’s median County home price. Mortgage interest rates range from 4.6 percent to 5.2 percent. The City of East St. Louis is in a Federal Empowerment Zone, and an Illinois River Edge Redevelopment Zone. These two designations enable the City’s Department of Community and Economic Development access and leverage state and federal monies to improve the quality of life for its citizens. Formerly an industrial center of railroad-related industries and warehouses, East St. Louis experienced a decline that paralleled the national decline in the manufacturing sector. The City is currently undergoing a renaissance, creating new business opportunities and housing initiatives. One recent innovation is the introduction of urban farming. The City, in conjunction with neighborhood development groups, civic groups, nonprofit organizations, and universities, has transformed sections of underutilized or vacant blocks of land into gardens. This project not only increases the property values by decreasing the vacancy and underutilization, it also provides a valuable service to city residents. The residents now have the opportunity to grow and sell fresh fruits and vegetables while beautifying their city. All of these initiatives contributed to the rise in property values in this Illinois neighborhood.

Illinois Mortgage Laws and Regulations

When purchasing a home in Illinois, the real estate agent is required to submit a Real Estate Transfer Disclosure Statement. This statement includes generic information that has been negotiated by the seller and the buyer such as what items are included in the sale of the property. It also includes a list of any potential hazards with the property. For example, the home may contain lead-based paint. The buyer could request that the seller remove the lead-based paint as part of the terms and conditions of the sale. As the removal process is quite expensive, the seller may reduce the asking price of the property rather than agree to the removal process. This negotiation will appear in the final selling documents. However, the buyer should consider insurance costs and the potential affect of this disclosure on his mortgage interest rate prior to reaching any agreement.

Illinois Real Estate Act

The Illinois Real Estate Act governs the interest rates available for the purchase of real estate. Most states have enacted similar laws, with interest rates capped at anywhere from 5 percent to 15 percent. However, all parties to the loan document may agree on an interest rate that is in excess of the state’s legal limit. Further, the Act stipulates that high-dollar value mortgages must be issued as fixed-rate mortgages, rather than adjustable rate mortgages. This provision protects the borrower from the variations inherent in an adjustable rate mortgage. It is especially important to provide that protection in cases of high-dollar value mortgages, as an increase in interest rates could place the mortgage payment beyond the limits of the borrower’s ability to pay.

Consumer Safeguards

Additionally, Illinois protects consumers from predatory lending practices. Lenders may not charge more than 6 percent of the value of the loan in fees and points. Lenders must accurately assess the borrower’s ability to repay the loan prior to its issuance. The predatory lending laws also prohibit lenders from requiring that the borrower finance a single-premium credit insurance.

Helpful Government Programs

Other favorable mortgage options available in Illinois are federal and state Fair Housing Authority mortgages, US Department of Agriculture loans, and Veterans Administration loans. The Illinois Fair Housing Authority offers programs for first-time buyers that may enable them to receive a below-market mortgage rate. Educational professionals may also qualify for Illinois’ Extra Credit Teacher Home Purchase Program, which provides loan assistance with the potential of interest forgiveness for the down payment on a home. The disabled and their caretakers also qualify for mortgage assistance programs such as interest-only loans.

Illinois’ Interest Only PLUS loan is an unconventional loan available to qualified individuals. This loan allows the buyer to finance 100 percent of the home’s cost through a 35-year loan. For the first five years of this loan, the borrower pays only the accrued interest on the loan.

Re-Finance or Second Mortgage?

An individual should evaluate the circumstances of the loan and the loan’s long-term cost prior to deciding whether he should re-finance his home or take out a second mortgage. In almost every case, the homeowner will find more value in a re-finance rather than a second mortgage. Since a second mortgage takes a backseat to the primary mortgage, the interest rate is always higher than that of the primary. The risk for a second mortgage going into default it higher, justifying the rate increase. Additionally, a second mortgage enables the homeowner to borrow up to 100 percent of his home’s value. Should housing prices decline; the homeowner could find himself underwater with his home debt. Finally, with all of the programs offered by the state of Illinois, it is possible for a homeowner to draw equity from his home and achieve a lower interest rate than his original mortgage.

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