Regardless of real estate market conditions, first-time home buyers need to know what loan programs and grants are available to help as they begin the home buying process.
If you do your homework, there are many programs and grants available to first time homebuyers throughout the State of Illinois and the City of Chicago. While loan programs are commonly known among buyers, grants for home buyers might be less familiar. These first-time home buyer grants can be exactly what you need to buy a house and get started.
A grant is a gift of money to make it easier for home buyers to secure the funds needed for the DOWN PAYMENT and closing costs.
Who qualifies as a first time home buyer in Illinois?
According to the State of Illinois, a first-time homebuyer is someone who has not owned a principal residence for the three-year period ending on the date of purchase of the new home or an individual who has never owned a principal residence even if their spouse was a homeowner. A few other lesser-known qualifiers include:
A single parent who previously owned a home with a spouse; the principal residence previously held did not have a permanent foundation; if the property had code issues costing more than the home’s.
What is the benefit of home buyer programs and first-time home owner grants in Illinois?
They help more people qualify for home ownership. The combination of low income and a low credit score is an issue for many people wanting to own their own homes. These programs and grants can help bridge the gap, providing a solid path forward.
They make homeownership within reach. Many first-time home buyers are unable to save the customary 20 percent for a down payment. That can be a lot of cash to save.
Loan programs often provide options for home buyers in the 3 to 6 percent range, providing down payment assistance and lower mortgage fees. Down payment assistance and lower borrowing costs make it possible for many more people to qualify.
They allow new homeowners to make the house into a home. By reducing the amount a first-time home buyer needs at closing, money is freed up for some minor stuff and not so little stuff. A low-cost loan or grant can mean money for cleaning essentials, appliances, carpets, refinishing floors, or painting. It can mean the difference between a house and a home.
What are the available first time home buyer grants and loans in Illinois?
FIRST TIME HOME BUYER LOANS
FHA loans.
One popular option is a Federal Housing Administration loan, a mortgage program commonly referred to as an FHA loan, a mortgage backed by the federal government.
The FHA loan is the most popular government-backed home loan in the country. These low down payment loans are made by qualified lenders and guaranteed by the Federal Housing Administration.
FHA loans require just a 3.5 percent down payment for borrowers with a 580 credit score or higher. For homebuyers with less than perfect credit, these loans provide a great benefit. Loans backed by the government mean average FHA interest rates are lower than a typical conventional mortgage.
If you have a credit score lower than 580, assistance is still available with 10 percent down. Lending guidelines and policies will vary with each lender, so check with your loan officer. Payment assistance programs can make getting a mortgage loan and buying a home attainable for someone who has never been able to reach it before.
If a homebuyer has a good credit score, there are likely better options than an FHA loan. FHA charges fees that other lenders do not because of the risk of lending to consumers with lower credit scores. First-time homebuyers should discuss the total cost of borrowing with their loan officer.
Conventional loans.
This is a great option for home buyers with steady employment and good credit but short on a down payment. Many home buyers are unaware that conventional loans with a mortgage lender are available with as little as 3 percent down.
Keep in mind if the down payment is less than 20 percent, private mortgage insurance will be charged until the equity in the home reaches the 20 percent level. Talk to your mortgage lender for more information.
Loans for first responders and public servants.
Known as the “Good Neighbor Next Door” (GNND), this loan program serves firefighters, EMS workers, law enforcement, teachers, and other “public servants.” One unique benefit is that the GNND loans are available to all home buyers, not just first-timers. This is offered on a first-come basis, so applicants must be prepared to act quickly upon finding a home.
All the loan programs above are available for single-family homes, condominiums, and multi-unit dwellings. Depending on the property type, there might be slightly different lending requirements.
FIRST TIME HOME BUYER GRANTS
Each grant program has its own terms and conditions to qualify, including: occupying the home as a primary residence, low-to-moderate income, purchase price limits, small down payments, and enrolling in a home buyer class.
Grant programs are available by geographic area, county, and the state level. There are grant programs available through many government agencies, both state and local. The following is information about a few. Many are for first-time home buyers, but not all, so check out the details for each program to see if it works for you.
Grant Programs for First Time Home Buyers
1stHomeIllinois. This is a state program offering a $7,500 grant toward down payment and closing costs in Cook, Marion, St Clair, and Winnebago counties. It is only available to first-time buyers, although that requirement does not apply to veterans and specific geographic areas.
Wintrust Mortgage. A local Chicago mortgage company, Wintrust, provides a first-time buyer grant of $2,000 for Cook, Lake, McHenry, Kane, Will, and DuPage counties. Buyers are required to contribute $1,000 in personal funds and complete a buyer counseling program. The program is for buyers of one or two-unit properties as primary residences.
Affordable Housing Corporation of Lake County. AHC’s program serves first-time buyers in Lake County, providing down payment assistance up to 5% of the purchase price. A home buyer education class and counseling are required. The loan is forgiven after five years unless it is sold before that time and then it is partially repaid.
Chicago Home Buyer Assistance Program. The city of Chicago offers up to 7 percent assistance for down payment and closing cost needs. There is a required eight-hour education course with a minimum personal contribution of $1,000 or 1 percent of the purchase price. Partial repayment is required if the home is sold before the five-year forgiveness period.
At Harty Realty Group, we can connect you with a lender that handles the loan programs described above. It’s important that first-time homebuyers speak with a loan officer to find the first-time homebuyer program that works for their particular situation and home-buying needs.
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