Chicago First-Time Home Buyer Programs
Without a doubt, the most significant challenge for first-time homebuyers is coming up with the downpayment. Although many assume it takes a hefty amount of money to buy a home, not everyone is aware that there are plenty of programs available to help you in the process.
In reality, both local and government initiatives strive for more homeownership because it has positive effects on the entire community, as well as the individual homeowners themselves.
So if you are in the Chicagoland area and are looking to buy a house in Chicago or surrounding counties, this blog is for you. With over 2,000 home buyer assistance programs, it is always tough to find the very best program. And that is why in this blog, I will give you the top Chicago First-Time Home Buyer Programs if you are in Illinois.
There are three types different types of Down payment assistance programs, there are Statewide, local programs and lender programs. First, we will cover the state-wide program, then the local, and finally, the lender programs. Make sure you finish this blog to the end to see how downpayment assistance programs work, how they each compare, and how you can use them to win the home you want.
IHDA- Who are they?
IDHA is a government-funded organization that assists Illinois residents with housing. The most useful down payment assistance programs are the programs offered by IHDA. The Illinois Housing Development Authority (IHDA) is a state agency created to help affordable housing across the state of Illinois. They provide both downpayment assistance programs and mortgages.
The Illinois Housing Development Authority currently provides three different down payment assistance programs that provide different benefits for homeowners.
Before we go over the programs, here is who qualifies.
To qualify for Illinois down payment assistance, you must meet a few criteria:
- Have a credit score of at least 640
- Take a homebuyer education course
- Get a first mortgage through IHDA
- Have a debt-to-income ratio of 45% or below
- Fall below income limits for most under $111,000
The first program we will cover is the IHDAccess Forgivable
The IHDA forgivable loan is a downpayment assistance program that gives you up to 4% of the purchase price of up to $6,000. The program funds can be used for a downpayment or closing costs for anyone in Illinois Statewide.
The forgivable loan gives you the money to close and is forgiven after ten years of homeownership which is a great option. Meaning that if you purchase a home and live in it for the next ten years, you will not need to pay any of the money back, and it will all be forgiven.
You must also use the home as your primary resistance for 10 years. Again, the minimum allowed credit score is 640, and all eligible homebuyers must contribute at least $1,000 or 1% of the purchase price, whichever is greater.
IHDA also offers a deferred interest-free down payment assistance program. The program covers 5% of the purchase price up to $7,500. This is a great program that doesn't need to be paid back and is deferred for the life of the loan. You only need to repay your loan once you sell your house, refinance or pay off your mortgage.
Also, similar to the forgivable loan, You must meet the income limit of $111,000, and the home must be below $349,000. The only requirement is that you must use an IHDA-approved lender.
The IHDA repayable loan goes even higher with assistance and gives first-time home buyers up to $10,000 or 10% of the purchase price. This program, unlike the other previous two, is a second interest-free loan that will be repaid monthly over the first 10-year period.
Meaning you will have a second monthly payment every month until the downpayment assistance is completely paid off.
The repayable loan is an excellent option for those that can qualify and wants more money to help close on their home. The repayment amount will be around $100-$200 monthly, depending on the loan amount. You must meet the same income and purchase limits as before, and You also must use an IHDA-approved lender to access this loan program.
Occasionally, IHDA offers a program called SmartBuy. If you're a first-time homebuyer struggling with student loan payments, SmartBuy could be the solution for you! With this program, qualifying buyers can receive up to $5,000 in down payment assistance and 15% of their purchase price (up to $40,000) toward student loan debt relief.
As of May 2022, enrollment in the SmartBuy program has been temporarily suspended. However, with new funding, restoration could be a possibility. If you want to know more about this program, message me in the description box below, and I can let you know if this has been reopened.
How do Illinois first-time homebuyer programs work? What's the process?
To take advantage of the IDHA programs, there are a few items that need to be covered. Here is a basic breakdown of the process.
- Find an IHDA-approved lender- If you're searching for an IHDA lender in your area, look no further than the IHDA website! Only lenders the Illinois Housing Development Authority has approved can approve loans eligible for down payment assistance. Make sure to search on the official website to find a certified and trustworthy lender near you. (To make it easier to find the IHDAs list of approved lenders, I am providing a link in the description box below.)
- Get Pre-Qualified- To identify which loan programs you are eligible for and the amount of money, interest rate, and associated fees, a Loan Officer will ask that you submit financial information. To find the most affordable terms and conditions, it pays to consider offers from various lenders before selecting one.
- Take the Homebuyer Education Course- To gain approval from the Illinois Housing Development Authority, you must complete a homebuyer education course before your loan can be closed. To be accepted, your course must follow all policies and regulations outlined by the US Department of Housing and Urban Development (HUD).
- Find A Home- When you have been pre-qualified and have taken the homebuyer education course, you will be ready to find a property. You can search for homes on your own or with the help of a real estate agent because they are free for buyers. If you are in the Chicagoland area and would like to shop for available homes for sale, make sure to check out our website with all of the latest listings across the Chicagoland area.
Also, we are realtors in the Chicago land area and would love to hear about your specific situation. If you have any questions you can send me a message. All of my information is in the description box below.
Next, Let's discuss the various other downpayment assistance options available to Illinois residents, not only from state-level programs but from local programs as well.
FEDERAL HOME LOAN BANK OF CHICAGO DOWNPAYMENT PLUS
Federal Home Loan Bank of Chicago is a government-sponsored bank that offers housing finance and community investment. The Downpayment Plus Program (DPP) helps homeowners acquire assistance with down payments and closing costs when purchasing their dream home!
With Downpayment Plus, the grant is supplied to borrowers at closing and paid back over five years. These funds are forgiven monthly during this time frame, ultimately leaving the borrower debt free after completion of the program.
The Downpayment Plus is an excellent opportunity for those looking to purchase a home and utilize nonprofit mortgage financing programs.
Grants can provide up to $10,000, and a home price limit is up to $700,000 for first-time home buyers.
BUILDING NEIGHBORHOODS AND AFFORDABLE HOMES PROGRAM
The Building Neighborhoods and Affordable Homes Program helps homebuyers invest in housing within their community, ultimately making homeownership more attainable.
If you want to purchase in Englewood Square, North Lawndale, South Lawndale, Humboldt Park/Garfield Park, or Woodlawn, The Building Neighborhoods and Affordable Homes, the program might be right for you.
Homebuyers can receive up to $60,000 in assistance to purchase homes built through the City Lots for Working Families programs. The income of the whole home can be at most 140% of the area median income, and the homebuyer must live in the home for a minimum of 10 years.
Large Banks (DPA)
There are also two other programs that are available nationwide that many people find valuable to use.
CHENOA - The first one is the CHENOA program. The CHENOA is a loan program that offers two Down Payment Assistance, a repayable and a forgivable loan that allows you to be eligible with a credit score as low as 600. The program also doesnt have an income limit, but the home price limit must be below the FHA loan limit for your area. CHENOA offers 3.5% and 5% down payment assistance amounts.
NACA - NACA is The Neighborhood Assistance Corporation of America program. This is a program that offers 100% financing. The cons of this program are the process is lengthy, but if you are lower income and are ok with the additional work, NACA is definitely something you need to look into.
In addition, many large banks, Bank of America, offer Down Payment Assistance programs for those who qualify.
The qualification requirements vary from bank to bank but generally include income limits, debt-to-income ratios, credit scores, and loan limits. You’ll need to speak with a bank representative to get more information about their specific program and requirements.
While this blog is intended to teach you how to reduce the money needed at closing, it does not suggest avoiding having any funds available for purchasing a house. Instead, leverage these programs to give you more financial freedom and use the funds as a contingency plan for unexpected repairs or leverage in negotiations.
If you're a first-time homebuyer or haven't owned any real estate rights in the last three years, then these programs are available to you.
If you want to talk about your specific situation, I would love to hear from you. You can set an appointment or shoot me a text message.
I hope this blog was helpful, and I wish you the best of luck with your home-buying journey!
Posted by Rafael Velasco on