FHA and conventional loans diverge on three things: the cash required to close, the monthly mortgage insurance premium, and how long that premium lasts. In Illinois, a fourth variable joins them — a typical home value near $296,000 against an effective property tax rate of 1.92%, which adds $472 to every monthly payment before the loan costs anything. The tool below compares both programs side by side on Illinois numbers.
Illinois buyer snapshot
| Typical home value | $296,000 |
|---|---|
| FHA example purchase3.5% down vs. 5% down for conventional | $295,000 |
| Estimated FHA loanUnder the national FHA floor — program available statewide | $284,675 |
| Property tax escrow1.92% effective rate | $472 |
| Homeowners insuranceEscrowed monthly in most loans | $125 |
Home values: Zillow, September 2026. Income, rent, and property tax: U.S. Census Bureau ACS, 2024. Insurance is an estimate. Sources · How every state compares
Illinois: FHA vs. conventional, dollar for dollar
| FHA cash to close (3.5% down + closing, UFMIP financed) | $17,700 |
|---|---|
| Conventional cash to close (5% down + closing) | $22,125 |
| FHA monthly P&I + MIP | $1,916 |
| Conventional monthly P&I + PMI | $1,911 |
| FHA total monthly paymentHeadline result | $2,513 |
| Conventional total monthly paymentHeadline result | $2,508 |
| Monthly differenceFHA is cheaper per month | $5 |
| FHA mortgage insurance horizon | Life of the loan |
Illinois-specific costs and rules
Property taxes in Illinois
Illinois has one of the highest effective property tax rates in the US, driven by school-district levies; Cook County assessments and classification appeals matter a great deal to investors. At the statewide effective rate that is $5,660 per year on a $295,000 home, escrowed at $472 monthly — a real chunk of the payment that lenders include in your DTI. Escrow shortages from reassessments show up as payment hikes a year after closing.
Insurance and physical risk in Illinois
The example assumes $1,500 per year. Hail and tornado claims set premiums across the Midwest. Check roof age and deductible structure before underwriting a rehab, and expect a separate wind/hail deductible in many counties. Insurance costs are what push DTI ratios over the FHA ceiling in exposed counties, so quote coverage before you are under contract.
Mortgage insurance is federal, not local
FHA's annual MIP lasts the life of the loan below 90% LTV (and at least 132 months above it), while conventional PMI cancels automatically at 78% of the original value. That rule is identical in every state — so the Illinois variable that actually moves the comparison is the price-to-income and tax picture, not the premium rules.
How to compare loans for an Illinois purchase
- The tool loads with a $295,000 Illinois purchase at the statewide typical home value. Change the price to your target home — everything else scales from it.
- Adjust the down-payment sliders: FHA floors at 3.5% (580+ credit score), conventional typically starts at 5%.
- Enter property taxes from the county assessor and an actual insurance quote rather than the Illinois averages used here.
- Compare the two monthly totals, then look at the mortgage insurance horizon: FHA's premium is permanent below 90% LTV, so a refinance out of FHA is part of the plan for most buyers.
- Check cash to close. FHA's financed UFMIP (1.75% of the loan) raises the balance but keeps cash at closing lower — often the deciding factor for first-time Illinois buyers.
Methodology
Both scenarios amortize a 30-year fixed loan with the standard payment formula P·r/(1−(1+r)^−n). FHA finances a 1.75% UFMIP into the balance and charges annual MIP in 1/12 monthly installments; conventional charges PMI until the balance reaches 78% of the original value (or 80% by borrower request). Total cost adds down payment, closing costs, every monthly payment, and all mortgage insurance over the horizon.
The Illinois defaults use the statewide median home value, effective property tax rate, and a typical insurance premium; rates are illustrative constants, not live quotes. The national FHA vs. conventional guide explains each assumption in full.
Sources
- Typical home value: Zillow Home Value Index (all homes, mid tier, seasonally adjusted), September 2026.
- Median household income: U.S. Census Bureau, American Community Survey 1-year estimates, table B19013, 2024.
- Median gross rent: U.S. Census Bureau, American Community Survey 1-year estimates, table B25064, 2024.
- Effective property tax rate: Median real estate taxes paid (B25103) ÷ median home value (B25077), Census ACS 1-year, the Tax Foundation's method, 2024.
- Homeowners insurance: Keystone estimate of a typical annual premium. Replace it with a quote for the address, 2026.
Read the full methodology, worked example, and caveats in the national FHA vs. Conventional guide.
Illinois FAQ
- Is FHA or conventional better for an Illinois buyer?
- At the defaults above, FHA is cheaper by $5 per month, and FHA requires $4,425 less cash to close. Choose FHA when cash is tight or credit is under 680; choose conventional when you can put 5–10% down and want mortgage insurance that eventually cancels.
- What home price can an Illinois buyer afford with an FHA loan?
- Start from the payment card, not the price card. The example's $2,513 total payment on a $295,000 home includes $472 of Illinois property tax escrow and $125 of insurance. Lenders qualify you on total DTI, so the tax-and-insurance load directly reduces the price you can carry — often by tens of thousands of dollars in higher-tax Illinois counties.
- Do Illinois property taxes change the FHA vs. conventional decision?
- Yes, through DTI. At 1.92%, taxes add $472 to the monthly payment — the same for both programs, but it consumes qualifying capacity that conventional borrowers with lower loan amounts may not need. It does not change which program's mortgage insurance is cheaper; that is a function of down payment and timeline.
- Can I drop FHA mortgage insurance on an Illinois home?
- Only by refinancing into a conventional loan once you have roughly 20% equity — FHA's MIP is permanent below 90% LTV. In a market appreciating at normal rates, that refinance typically becomes available 3–6 years after closing. Model it: run the comparison again with conventional at 5% down plus the refinance closing costs to see whether the trade pays.
Other state editions
Every state gets its own edition of the FHA vs. Conventional, preloaded with that market's typical values, tax rates, and insurance costs: