Fun fact: Illinois is fondly called the "Land of Lincoln," honoring Abraham Lincoln’s deep ties to the state, with over 250 landmarks commemorating the 16th president. But Illinois isn’t just rich in history—it’s also an intriguing state for real estate investment. This comprehensive guide will explore everything you need to know about investing in Illinois real estate, including mortgage eligibility requirements, available property types, and popular areas to buy property.
We are providing the following discussion to you for informational purposes only. All investments, including real estate, involve risk, and we encourage you to invest carefully. The information in this article is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice or service. You should consult with a professional in the respective legal, tax, accounting, real estate, or other professional area before making any decisions or entering into any contracts relating to a rental property.
Many real estate investors use debt-service-coverage-ratio (DSCR) loans to buy income-generating properties. As a foreign national, DSCR loans provide a unique opportunity that traditional mortgages do not.
A DSCR loan allows investors to purchase rental properties in Illinois without the need to live in the state. Unlike traditional loans, these loans are not based on the borrower’s personal income. Instead, they focus on the property’s rental income and its ability to cover the loan payments.
This type of financing also offers more flexibility when it comes to documentation and qualification criteria, making it easier for foreign investors to acquire property in Illinois and other states. Compared to a traditional mortgage, the process is more straightforward, simplifying the path to investment property ownership for those looking to invest in Illinois' real estate market.
DSCR loans offer solutions to make your investment journey less complicated. Here are some of the key benefits:
By leveraging these benefits, foreign investors can easily navigate the Illinois market and secure financing for their rental property investments.
When applying for a real estate investment loan in Illinois as a foreign national, it’s important to understand that different lenders may have different criteria. Some lenders are more flexible with international investors than others, so knowing what to expect can help you make the right choice for your investment goals.
Here’s a breakdown of the key requirements most lenders have for foreign nationals, compared to the more flexible options available through Waltz, a foreign national-friendly lender:
Most lenders: U.S.-based income is generally prioritized, while foreign income may require extensive documentation. Lenders typically ask for proof of U.S. income, as well as supporting documents like W-2s, business income, bank statements (often requiring a U.S. bank account), and tax returns.
Waltz: While we consider both U.S. and international income, we simplify the process by gathering the necessary documents upfront. Unlike many traditional lenders, we place a stronger focus on the income generated by the rental property you wish to purchase, rather than just your personal finances.
Most lenders: Foreign nationals often face higher down payment requirements, typically ranging from 30% to 50%. Many investors choose to pay cash because of these high down payments. Additionally, some lenders impose reserve requirements, meaning you must have extra funds to cover potential vacancies or unforeseen issues.
Waltz: We generally require a 30% down payment, but in some cases, as low as 25%. Depending on your financial situation and the property you’re looking to buy, we may not require any reserve funds at all, making it easier to move forward with your investment.
Most lenders: Lenders will ask for proof of identification, such as a passport, and may request proof of address. For investment property loans, they typically require the loan to be under the name of an American LLC, with you acting as the personal guarantor.
Waltz: At Waltz, we use your passport to verify your identity, regardless of whether it's from the U.S. or abroad. Since we specialize in investment property loans, we also require the mortgage to be in the name of an LLC. The big difference is that we provide an Investor Kit, which includes the formation of an LLC with an EIN and a U.S. bank account, simplifying the process and saving you time.
Most lenders: Many lenders require a minimum U.S. credit score, often around 640. If you don’t have a U.S. credit history, securing a mortgage can be difficult.
Waltz: Did you know that 50% of international investors opt to pay cash? That’s because securing a loan without a U.S. credit score has traditionally been a barrier. With Waltz, we don’t require a U.S. credit score. Instead, we look at alternative methods like reviewing your international credit history or evaluating your assets, making it easier for you to qualify.
Find out how international investors have benefited from working with Waltz.
Illinois offers various property types, each catering to specific investment strategies and preferences. Here's an overview of the main property types available for purchase, their appeal to investors, and recent statistics related to Illinois:
When considering an investment in Illinois real estate, aligning the property type with your investment goals, management preferences, and market trends is essential. Staying informed about current statistics and market conditions will aid in making well-informed decisions.
Illinois offers many advantages for real estate investors, making it a preferred location for international buyers. Here’s why investing in Illinois real estate stands out:
1. Strong rental demand: Illinois, particularly its major urban center Chicago, maintains a robust demand for rental properties, ensuring a steady cash flow for landlords. As of 2021, approximately 54.2% of Chicago households were renters, reflecting a stable rental market. Additionally, the median rent for all property types in Chicago was $1,900 as of November 2024, indicating a healthy rental income potential. These contribute to a consistent and reliable income stream for property owners in the region.
2. Diverse economy: The state’s economy spans industries such as finance, technology, manufacturing, and agriculture, offering stability even during market fluctuations. Major employers like AbbVie Inc., Allstate, Caterpillar Inc., John Deere, and Walgreens Boots Alliance contribute significantly to the state’s economic resilience, making it an attractive destination for real estate investment. These factors create a dynamic and robust market for local and international investors.
3. Affordable prices: Compared to states like California and New York, Illinois offers more affordable property prices, especially in suburban and smaller metropolitan areas. These factors make Illinois a lucrative option for foreign nationals looking to grow their wealth.
Illinois offers diverse real estate opportunities, making it an excellent choice for long-term growth and steady rental income. Whether you’re aiming for portfolio diversification or immediate cash flow, Illinois’s real estate market has something for every investor. With options like DSCR loans simplifying the process, foreign nationals can confidently locate opportunities in this vibrant state.
Chicago, the third-largest city in the United States, combines a rich cultural heritage, a vibrant economy, and diverse neighborhoods. It is home to many industries, including finance, technology, and healthcare, which drive population growth and housing demand. Its strong public transportation system and proximity to Lake Michigan further enhance its appeal.
Key features:
According to the U.S. Bureau of Economic Analysis, the Chicago-Naperville-Elgin metropolitan area's Gross Metropolitan Product (GMP) was approximately $894.9 billion in 2023. This substantial economic output underscores Chicago's significant financial strength.
Naperville, a thriving suburb of Chicago, is a magnet for families and professionals seeking a high quality of life. Known for its top-ranking schools, low crime rates, and community-focused lifestyle, it is a prime destination for long-term real estate investments.
Key features:
Economic indicators highlight Naperville's median household income of $150,937—significantly above the national average. Its population growth has remained steady, with an average annual growth rate of 0.71% between 2000 and 2023, reinforcing its desirability for families and investors.
Springfield, the capital of Illinois, blends affordability with economic stability. As a government hub, it benefits from a steady workforce, ensuring reliable demand for housing. The city’s rich history and lower cost of living make it an attractive market for investors.
Key features:
As of October 2024, Springfield's unemployment rate is 4.3%, slightly below the national average of 4.4%. Additionally, Springfield's cost of living is approximately 26% lower than the national average, making it one of the most affordable capital cities in the U.S.
Rockford, often called the "Forest City," is a hub for manufacturing and industrial activity because of its historical emphasis on forestry and natural beauty. Its affordability and strategic location near major transport routes make it a growing hotspot for real estate investors seeking opportunities in Illinois.
Key features:
Rockford’s job growth rate has steadily increased, and its strategic location near Chicago and Milwaukee enhances its economic prospects. Additionally, local initiatives to boost tourism and infrastructure development are expected to stimulate the housing market further.
Real estate investors in Illinois need to understand the state’s unique geography, economy, and legal landscape before purchasing property. Here’s what to consider:
Refinancing your Illinois investment property involves replacing your current mortgage with a new one to better suit your financial goals. The refinancing process for foreign nationals typically includes:
Once approved, you’ll finalize the refinancing transaction and move forward with your updated mortgage terms.
Rate-and-term refinancing offers the opportunity to modify your existing mortgage, potentially securing more favorable loan terms. By adjusting the interest rate or the length of your loan, you might lower your monthly payments or better align with your current financial goals. However, it's important to keep in mind that while refinancing at a lower interest rate can reduce monthly payments, the total finance charges over the life of the loan may end up being higher. Always weigh the short-term savings against the long-term costs before making a decision.
Cash-out refinancing lets you unlock the equity in your property, giving you access to additional funds. For Illinois real estate investors, this money can be used for property upgrades, debt consolidation, or a down payment on another investment. By providing cash at closing, this option helps broaden your investment opportunities and flexibility.
Learn more about refinancing.
Steps to get a DSCR investment property mortgage
If you’re a non-U.S. resident looking to secure a mortgage in Illinois, Waltz offers a straightforward and efficient process. Here’s how Waltz can help you navigate each step with ease:
1. Find a profitable investment
Begin by identifying a property with strong rental potential. Focus on areas in Illinois that align with your investment strategy and financial goals. Look for neighborhoods with high rental demand to ensure consistent cash flow.
2. Gather essential documents
Prepare the necessary documentation, such as a valid passport, proof of income (like foreign bank statements or business financials), and details of the property you're interested in. You may also need to provide proof of assets or a credit report from your home country.
3. Select a lender experienced with foreign nationals
Look for a lender who understands the needs of foreign investors. They should understand the complexities of verifying foreign income and handling the absence of a U.S. credit history. Waltz specializes in loans for foreign nationals and can guide you every step of the way.
4. Set up an LLC and U.S. bank account
Most lenders, including Waltz, will require that your DSCR loan be issued under the name of a U.S.-based LLC. You'll also need a U.S. bank account for the transaction. While setting up an LLC and obtaining an Employer Identification Number (EIN) can take time, with Waltz’s Investor Kit, you can instantly create an LLC and open a U.S. bank account, saving you months of waiting.
5. Submit your loan application
Before submitting your loan application, consider consulting with an account executive at Waltz. They’ll help you understand the process and ensure you have all the necessary documents in order. With the right guidance, your application will be quick and straightforward, allowing you to submit it efficiently.
6. Perform due diligence
This step involves inspecting the property, getting an appraisal, and fulfilling any additional requests from the lender to verify the property’s condition and value. You’ll also want to review your term sheet carefully to ensure everything aligns with your expectations.
7. Complete the purchase process
Once the due diligence is completed and your loan is approved, it's time to finalize the purchase. Sign the required paperwork (which can be done virtually if you're outside the U.S.) and transfer the funds to close the deal. Before you know it, you’ll own a rental property in Illinois!
By following these steps, securing a DSCR loan in Illinois as a foreign investor becomes an organized, streamlined process with the right support from Waltz. Whether you're new to U.S. real estate or an experienced investor, we make it easier to navigate Illinois' competitive market and achieve your investment goals.
Apply for a DSCR loan today!
