Regardless of real estate market conditions, first time homebuyers 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 might be less familiar.
A grant is a gift of money to make it easier to for home buyers to secure the funds needed for the down payment and closing costs.
Who qualifies as a first time homebuyer in Illinois?
According to the State of Illinois, a first-time homebuyer: 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 spouses 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 owned did not have a permanent foundation; if the property had code issues costing more than the value of the home.
What is the benefit of homebuyer programs and 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 take the step of owning their own home. 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 percent 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 little stuff and not so little stuff. A low-cost loan or grant can mean money for cleaning essentials, appliances, carpet, refinishing floors or paint. It can mean the difference between a house and a home.
What programs and grants are available to Illinois and Chicago first-time homebuyers?
FHA loans. One popular option is a Federal Housing Administration loan, commonly referred to as an FHA loan, which is 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 means average FHA interest rates are lower compared to a typical conventional mortgage.
If you have a credit score lower than 580, assist is still available with 10 percent down. Lending guidelines and policies will vary with each lender, so be sure to check with your loan officer.
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. For home buyers with steady employment and good credit, but short on a down payment this is great option. Many home buyers are unaware that conventional loans 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 equity in the home reaches the 20 percent level.
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 need to 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 type of property, there might be slightly different lending requirements.
Each grant program has its own terms and conditions to qualify including: occupying the home as 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 at the state level. 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.
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 a primary residence.
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.
An Exclusive Buyer Agent can help you navigate these challenges. Find an agent here.