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How much home can a family earning $87,000 a year get in Chicago?

Homeownership offers a path to stability and generational wealth, but getting that first home can prove tricky. Let’s say you’re a family of four interested in buying a home. Your family earns $87,000 annually (or less than 80% of the area median income) and has a credit score of 680 (a requirement for the majority of lenders), and current interest rates are 6.5% to 6.75%. So, what kind of home can you buy?

Lets find out!

Both counseling and HUD certified home buyer education courses are required for subsidies such as down payment assistance

Your family is interested in a modular home in West Humboldt Park that's priced at $390,000.

Yes

Start over. These are required for subsidies such as down payment assistance

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Good news. You knew to take the required housing counseling and attended a HUD-certified homebuyer education course. You can’t get much assistance without those.

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Congratulations! Your family's eligible to borrow between $270,000 and $315,000, depending on any other debt you carry, such as student loans, but that's well below the $390,000 you need. Don't give up!

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Subs

Hooray! You found a subsidy. Because the home was built on a vacant city-owned lot, your family can get a subsidy of $70,000 under the Building Neighborhoods & Affordable Homes Program. That lowers the home price to $320,000. You're almost there.

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Here are the details of what you're getting:

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Wait. No basement? That might be a deal killer for you.

Instead of the modular home, you find a vacant building in West Humboldt Park that needs a rehab. The home cost is $200,000. The rehab will cost $160,000 for a total project cost of $360,000. Oh boy, that's too much. You need to get that price down a bit.

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Good news. You find a new subsidy. Under the City of Chicago Tax-Increment Financing Purchase Rehab Program (available in six TIF districts), your family can get a subsidy that covers 25% of the project cost, or $90,000, in this case. But there are drawbacks.

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One of the drawbacks is that you must stay in the home for 10 years. If you move out or sell before then, you must pay the subsidy back. But that's OK with you. You love the home and are ready to buy. The subsidy puts the loan amount at $270,000. Closing costs are part of the loan. You did it!

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Bingo. You qualified for an Illinois grant of $20,000 to help with the down payment. Your loan amount is $300,000, well within your loan qualification range of $270,000 to $315,000. Let's see what that gets you.

Here are the details of what you're getting: Terms: 30-year, fixed-rate loan has a monthly payment of $2,400 and a 7.0% interest rate. That includes annual property taxes and insurance of $7,200, or $600 a month.Advantage: Rehabbed older home with a basementDisadvantage: Must stay in the home for 10 years

Cheers! Enjoy your new home.

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Terms: 30-year, fixed-rate loan has a monthly payment of $2,696 and a 6.75% interest rate. That includes annual property taxes and insurance of $9,000, or $750 a month.Advantage: New constructionDisadvantage: No basement or garage; a garage can be added later

By Judith Crown

Photo credit: Inherent L3C

Photo credit: Neighborhood Housing Services

Opening image credit: Getty Images

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May 28, 2024