Rent vs Buy in Chicago: Which Is Right for You?

Home Buying

Rent vs Buy in Chicago: Which Is Right for You?

May 06, 2019 | by Reuven Shechter

At A Glance

As a Chicagoan or someone considering moving to Chicago, you may be wondering if it’s better to rent or buy a home. It’s not always an easy decision, especially in a major city. Discover how the rental and buying markets look and what other factors to consider.

Rent vs Buy in Chicago: Which Is Right for You?

Are you living in Chicago and considering whether you should buy a home or continue to rent? In a large city, it’s not always an easy question to answer.

In Chicago, it’s especially challenging because you can choose from the city of Chicago or the Chicago-Naperville-Elgin Metro area. Expanding to the metro area helps you save some money on either decision, but it may also lengthen your commute.

To decide whether to buy or rent, it’s important to look at your financial situation and the overall real estate market in the area. Here’s what you need to know.

The Housing Market in Chicago and the Metro Area

What do home prices and the market movement look like in Chicago? The median price of homes sold in the last year in Chicago is $298,900. That’s not too bad for a major city, and it can get you a nice home or apartment depending on the neighborhood. Based on current listings, you’ll be looking at between 1,000 to 1,300 square feet.

For home buyers, the market is not as slanted toward sellers as other areas of the country. You’ll still need to move quickly, but you may not end up in massive bidding wars on every property you look at. That can be a big benefit if you’re looking to own a home!

In the metro area, you’ll see a stronger seller’s market. However, the median price of homes that sold in the last year is only $243,900. Of course, you’ll be looking at more detached homes and townhomes and fewer condos when you move into the suburbs.

Current mortgage rates in Illinois average 4.06% for a 30 year fixed mortgage. At that rate, your payments in Chicago will be around $1,470.90, and your payments in the metro would be around $1,172.87.

Working with a high-quality realtor can get you a great home at a great price. Owning a home can help you build equity and have more freedom when it comes to pets, decoration, and renovation. Plus, the payments eventually come to an end, unlike rent!

The Rental Market in Chicago and the Metro Area

So we know what the housing market looks like in Chicago. What about the rental market?

The median rent in Chicago $1,772 and in the metro is $1,695, which is more than you’ll pay for an average mortgage in either location. Right away this is a good sign that buying a home may be in your best interest especially in the metro area. Imagine saving $500 a month!

Even more notably, the rentals currently listed on Zillow are generally under 800 feet. Many feature only one bedroom and one bath. You’ll be getting significantly more space and a lot more freedom when you buy your own place.

Pros and Cons of Owning a Home

In Chicago, one of the biggest benefits of owning a home is that you’ll save money on a mortgage compared to rent. You’ll also get a lot more square footage and the freedom to have pets, decorate how you like, and even renovate your space.

Another significant benefit is that you’ll be building equity. That means you’ll have an actual asset after several years of payments. You can get this money back when you sell the home or by taking advantage of a home equity loan or refinancing.

There are some drawbacks, however. Illinois has the second highest property taxes of any state in the country. In Cook County, you’ll pay 2% of the assessed home value every year. You’ll also want to think about other ongoing expenses, including home insurance, repair costs, and utilities.

Getting Ready to Buy a Home

If you know that you want to buy a home in the near future, how do you prepare for the move?

Work on Your Down Payment & Closing Costs

The first thing you’ll need to do is save as much money as possible. As you might already know, having a down payment is an important part of buying a house. Pinching pennies and budgeting can make a big difference, and so can knowing where to find assistance.

You may be able to access Illinois programs that allow you to save money on the down payment and mortgage fees. If you can, definitely do so! The Illinois Housing Development Authority has a variety of programs, and you can also look into Fannie Mae or Freddie Mac federal programs.

Boost Your Credit Score

Aside from saving as much money as you can, you can save yourself a lot on interest and fees by boosting your credit score. Take a look at your credit report (it’s free each year) and make sure that everything listed is correct.

If there are any errors, report them to all three credit bureaus right away. From there, find out what factors are driving your credit score down. You can use a free website like Credit Karma to find out what your score is and how you can improve it.

Having the best credit score you can will go a long way toward helping you qualify for the best mortgages and assistance programs in Illinois.

Find a Great Chicago Realtor

Of course, the most important step in getting ready to buy a home is to find a great buyer’s agent who can help you. A buyer’s agent helps you tremendously in your home search.

They can help you pinpoint ideal properties for sale that match your needs. There’s no need to drive around looking for “for sale” signs or to find a property online only to discover there was already an offer made. A realtor will help you find an ideal home as soon as it’s listed, which can help you move much more quickly.

Finally, they can help you know what questions to ask and how to research a home before you commit to buying it. Realtors are strong negotiators and can help you drive a strong deal when you find the property you love.

Best of all, when you work with a Clever Partner Agent, you’ll get all that service plus $1,000 towards your closing costs if you qualify. There’s no way to lose! If you’re ready to buy, let us match you with an agent today.

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