Illinois First-Time Home Buying Assistance Programs & Grants for 2022

Illinois First-Time Home Buying Guide

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    By Kim Franke-Folstad

    (Last Updated – 06/2022)

    Thanks to high prices, low Inventory, and fierce competition from outside investors and cash buyers, diving into a strong seller’s market as a first-time buyer in Illinois can be daunting.

    According to Redfin, the median sale price in Illinois went from $273,600 in April 2021 to $285,700 in April 2022 — a 5% increase. But in some communities, the numbers have been much higher. In Winnetka, where home prices were up 76% year-over-year, the median purchase price was $1.5 million. Even in more affordable Edwardsville, home prices were up 39% compared with last year, selling for a median price of $313,000.

    Buyers may feel as if the keys to their first home are dangling further out of reach, but fortunately, the state and some counties offer financial assistance. There also are longstanding federal programs that could improve a buyer’s chances of success.

    Recommended: The SoFi Guide to First-Time Home Buying

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    6 Illinois Programs for First-Time Homebuyers

    Most first-time homebuyer programs in Illinois are designed to help low- to moderate-income buyers who need help coming up with a down payment and/or closing costs.

    Participants may have to meet requirements regarding income, credit scores, and debt-to-income ratio to qualify. Typically, the home must be the buyer’s primary residence, and the cost may be capped. At least one of the buyers may have to complete a homebuyer education course.

    The Illinois Housing Development Authority provides several options for first-time buyers in the Prairie State. Here are the details.

    Recommended: Understanding Mortgage Basics

    1. IHDA Access Forgivable

    The IHDA Access Forgivable program offers qualifying buyers a 30-year fixed-rate mortgage along with a forgivable second loan they can put toward their down payment, closing costs, or both.

    Participants have the option of choosing from different types of mortgages, including an FHA, VA, USDA, and Fannie Mae HFA Preferred home loans.

    Availability: Statewide

    Assistance Amount: 4% of the home’s purchase price, up to $6,000, for down payment and closing costs

    Type of Assistance: Second loan forgiven monthly over 10 years

    Benefits and Qualifications Include:

    •   Available to first-time and repeat homebuyers

    •   Borrowers must contribute $1,000 or 1% of the purchase price, whichever is greater

    •   Minimum credit score of 640

    •   Household income and purchase price limits based on location

    •   Existing and new construction homes are eligible

    •   Must complete homeownership education course

    To Apply: Contact an approved lender .

    2. IHDA Access Deferred

    The IHDA Access Deferred program also offers a 30-year fixed-rate mortgage with down payment assistance. But with this program, the second mortgage is an interest-free loan that is deferred for the life of the mortgage. The borrower doesn’t have to repay the second loan until the home is sold, refinanced, or paid off. Borrowers can choose from all mortgage types, including FHA, VA, USDA, and Fannie Mae HFA Preferred loans.

    Availability: Statewide

    Assistance Amount: 5% of the home’s purchase price, up to $7,500, for a down payment and closing costs

    Type of Assistance: Interest-free second loan is deferred for life of the mortgage

    Benefits and Qualifications Include:

    •  Available to first-time and repeat homebuyers

    •  Borrowers must contribute $1,000 or 1% of the purchase price, whichever is greater

    •  Minimum credit score of 640

    •  Household income and purchase price limits based on location

    •  Existing and new construction homes are eligible

    •  Must complete homeownership education course

    To Apply: Contact an approved lender .

    3. IHDA Access Repayable

    IHDA Access Repayable provides a 30-year fixed-rate mortgage paired with an interest-free second loan that can be used for a down payment and closing costs. This loan is repaid in monthly installments over a 10-year period. Borrowers have several loan options, including FHA, VA, USDA, and Fannie Mae HFA Preferred loans.

    Availability: Statewide

    Assistance Amount: 10% of the home’s purchase price, up to $10,000, for down payment and closing costs

    Type of Assistance: Interest-free second loan is repaid monthly for 10 years

    Benefits and Qualifications Include:

    •  Available to first-time and repeat homebuyers

    •  Borrowers must contribute $1,000 or 1% of the purchase price, whichever is greater

    •  Minimum credit score of 640

    •  Household income and purchase price limits based on location

    •  Existing and new construction homes are eligible

    •  Must complete homeownership education course

    To Apply: Again, contact an approved lender .

    4. Illinois State Treasurer’s Office Finally Home

    The Finally Home program, which is administered by the Illinois State Treasurer’s Office, was designed to help Illinois homebuyers who are having trouble qualifying for a conventional mortgage because of limited or damaged credit or a high debt-to-income ratio. The program offers a five-year 10% mortgage guarantee to participating lenders.

    Availability: Statewide

    Assistance Amount: Five-year 10% loan guarantee

    Type of Assistance: Guarantee becomes payable to participating lender if loan goes into default

    Benefits and Qualifications Include:

    •  Borrower must contribute at least 3.5% toward down payment

    •  Household income cannot exceed 150% of the U.S. Department of Housing and Urban Development’s median family income for the area (based on household size)

    •  Home price cannot exceed conforming loan limits established by Fannie Mae

    •  Must be unable to meet lender’s conventional mortgage guidelines

    More Information: Head here .

    To Apply: Search for lenders using the Finally Home program name. The lender you choose will submit the Finally Home program application for you as part of the loan process. If approved, the lender will contact you directly to discuss the details of the loan. If you can’t find a lender, you can get assistance by emailing [email protected] or by calling (866) 458-7327.

    5. Federal Home Loan Bank of Chicago Downpayment Plus

    The Federal Home Loan Bank of Chicago offers two down payment and closing cost assistance programs to qualifying borrowers. Downpayment Plus® provides income-eligible Federal Home Loan Bank of Chicago customers with a matching grant that is forgiven on a monthly basis over a five-year period.

    Availability:Statewide through Federal Home Loan Bank of Chicago lenders

    Assistance Amount: Maximum amount is the lesser of $6,000 or 25% of the first mortgage amount

    Assistance Type: Grant is forgiven on monthly basis over a five-year period

    Benefits and Qualifications Include:

    •  Easy-to-access down payment and closing cost assistance

    •  Grants are offered on a first-come, first-served basis

    •  Borrowers must apply for first mortgage financing with a participating Chicago bank member

    •  Must provide an executed purchase contract

    •  Must provide evidence of household income

    •  Must complete both pre-purchase homebuyer education and counseling

    •  Must contribute at least $1,000 toward home purchase

    To Apply: Contact a participating lender or FHLBank Chicago Community Investment at [email protected]

    6. Federal Home Loan Bank of Chicago Downpayment Plus Advantage

    Downpayment Plus Advantage® is similar to Downpayment Plus, but the grants are limited to homebuyers who are participating in a homeownership program offered by a nonprofit organization that provides mortgage financing directly to the homebuyer.

    The nonprofit organization must partner with a Federal Home Loan Bank of Chicago member financial institution to access DPP Advantage funds.

    Availability: Grants provided through nonprofits that provide direct first mortgages to qualifying homebuyers

    Assistance Amount: Maximum amount is the lesser of $6,000 or 25% of the first mortgage amount

    Type of Assistance: Grant is forgiven on monthly basis over a five-year period

    Benefits and Qualifications Include:

    •  Borrowers must apply for first mortgage financing with a participating nonprofit group

    •  Must provide executed purchase contract

    •  Must provide evidence of household income

    •  Must complete both pre-purchase homebuyer education and counseling

    •  Must contribute at least $1,000 toward home purchase

    To Apply: Contact a nonprofit organization, such as Habitat for Humanity, that originates first mortgages.

    Who Is Considered a First-Time Homebuyer in Illinois?

    A first-time homebuyer is typically defined as someone who hasn’t owned a primary home for at least three years.

    Illinois doesn’t have that qualification for its down payment assistance programs, but it’s always a good idea to be clear on all eligibility requirements before applying for any program.

    Federal Programs for First-Time Homebuyers

    Several federal government programs are designed for people who have low credit scores or limited cash for a down payment. Although most of these programs are available to repeat homeowners, like state programs, they can be especially helpful to people who are buying a first home or who haven’t owned a home in several years.

    The mortgages are generally for single-family homes, two- to four-unit properties that will be owner occupied, approved condos, townhomes, planned unit developments, and some manufactured homes.

    Some of these loan programs are also offered by the Illinois Housing Development Authority, you’ll notice, but without the perks the state offers.

    Federal Housing Administration (FHA) Loans

    The FHA, which is part of the U.S. Department of Housing and Urban Development, insures mortgages for borrowers with lower credit scores. Homebuyers choose from a list of approved lenders. Loans have competitive interest rates and require a down payment of 3.5% of the purchase price for borrowers with FICO® credit scores of 580 or higher. Those with scores as low as 500 must put at least 10% down.

    Gift money for the down payment is allowed from certain donors and will be documented in a gift letter for the mortgage.

    FHA loans always require mortgage insurance: a 1.75% upfront fee and annual premiums for the life of the loan, unless you make a down payment of at least 10%, which allows the removal of mortgage insurance after 11 years. You can learn more about FHA loans and look up FHA mortgage limits by state and county.

    Freddie Mac Home Possible Mortgages

    Very low- and low-income borrowers may make a 3% down payment on a Home Possible® mortgage. These loans allow various sources for down payments, including co-borrowers, family gifts, employer assistance, secondary financing, and sweat equity.

    The Home Possible mortgage is for buyers who have a credit score of at least 660. Once you pay 20% of your loan, the Home Possible mortgage insurance will be canceled, which will lower your mortgage payments.

    Fannie Mae HomeReady Mortgages

    Fannie Mae HomeReady® Mortgages allow down payments as low as 3% for low-income borrowers. Applicants generally need a credit score of at least 620; pricing may be better for credit scores of 680 and above. Like the Freddie Mac program, HomeReady loans allow flexibility for down payment financing, such as gifts and grants.

    For income limits, a comparison to an FHA loan, and other information, go to this Fannie Mae site .

    Fannie Mae Standard 97 LTV Loan

    The conventional 97 LTV loan is for first-time homebuyers of any income level who have a credit score of at least 620 and meet debt-to-income criteria. The 97% loan-to-value mortgage requires 3% down. Borrowers can get down payment and closing cost assistance from third-party sources.

    Department of Veterans Affairs (VA) Loans

    Active-duty members of the military, veterans, and eligible surviving spouses may apply for loans backed by the Department of Veterans Affairs. VA loans , to buy, build, or improve homes, have lower interest rates than most other mortgages and don’t require a down payment. Most borrowers pay a one-time funding fee that can be rolled into the mortgage.

    Native American Veteran Direct Loans (NADLs)

    Eligible Native American veterans and their spouses may use these no-down-payment loans to buy, improve, or build a home on federal trust land. The VA is the direct lender and charges a funding fee.

    U.S. Department of Agriculture (USDA) Loans

    No down payment is required on these loans to moderate-income borrowers that are guaranteed by the USDA in specified rural areas. Borrowers pay an upfront guarantee fee and an annual fee that serves as mortgage insurance.

    The USDA also directly issues loans to low- and very low-income people. Look here for income and property eligibility.

    HUD Good Neighbor Next Door Program

    This program helps police officers, firefighters, emergency medical technicians, and teachers qualify for mortgages in the areas they serve. Borrowers can receive 50% off a home in a “revitalization area.” They must live in the home for at least three years.

    First-Time Homebuyer Stats for 2022

    Ever wonder where you fit amid buyers shopping for their first home? Here are some nationwide stats from the National Association of Realtors® (NAR) 2021 Profile of Home Buyers and Sellers:

    Percentage of buyers who are first-time buyers: 34%

    Percentage of buyers in the NAR’s Midwest region who are first-time buyers: 38%

    Median household income of first-time buyers: $86,500

    Type of home purchased by first-time buyers:

    •  Detached single-family home: 80%

    •  Townhouse/rowhouse: 9%

    •  Condo/apartment (five or more units): 1%

    •  Duplex/condo/apartment (two to four units): 2%

    •  Other: 8%

    Median home price for first-time homebuyers: $252,000

    Median down payment for first-time homebuyers: 7%

    Median age of first-time homebuyers: 33

    Relationship status for first-time homebuyers:

    •  Married: 50%

    •  Single females: 20%

    •  Unmarried couples: 17%

    •  Single males: 11%

    First-time buyers with kids:

    •  No children: 70%

    •  One child: 15%

    •  Two children: 11%

    •  Three or more children: 5%

    Additional Financing Tips for First-Time Homebuyers

    In addition to federal and state government-sponsored lending programs, there are other financial strategies that may help you become a homeowner. Some examples:

    •  Traditional IRA withdrawals. The IRS allows qualifying first-time homebuyers a one-time, penalty-free withdrawal of up to $10,000 from their IRA if the money is used to buy, build, or rebuild a home. The IRS considers anyone who has not owned a primary residence in the past three years a first-time homebuyer. You will still owe income tax on the IRA withdrawal. If you’re married and your spouse has an IRA, they may also make a penalty-free withdrawal of $10,000 to purchase a home. The downside, of course, is that large withdrawals may jeopardize your retirement savings.

    •  Roth IRA withdrawals. Because Roth IRA contributions are made with after-tax money, the IRS allows tax- and penalty-free withdrawals of contributions for any reason as long as you’ve held the account for five years. You may also withdraw up to $10,000 in earnings from your Roth IRA without paying taxes or penalties if you are a qualifying first-time homebuyer and you have had the account for five years. With accounts held for less than five years, homebuyers will pay income tax on earnings withdrawn.

    •  401(k) loans. If your employer allows borrowing from the 401(k) plan that it sponsors, you may consider taking a loan against the 401(k) account to help finance your home purchase. With most plans, you can borrow up to 50% of your 401(k) balance, up to $50,000, without incurring taxes or penalties. You pay interest on the loan, which is paid into your 401(k) account. You usually have to pay back the loan within five years, but if you’re using the money to buy a house, you may have up to 15 years to repay.

    •  State and local down payment assistance programs. Usually offered at the regional or county level, these programs provide flexible second mortgages for first-time buyers looking into how to afford a down payment.

    •  The mortgage credit certificate program. First-time homeowners and those who buy in targeted areas can claim a portion of their mortgage interest as a tax credit, up to $2,000. Any additional interest paid can still be used as an itemized deduction. To qualify for the credit, you must be a first-time homebuyer, live in the home, and meet income and purchase price requirements, which vary by state. If you refinance, the credit disappears, and if you sell the house before nine years, you may have to pay some of the tax credit back. There are fees associated with applying for and receiving the mortgage credit certificate that vary by state. Often the savings from the lifetime of the credit can outweigh these fees.

    •  Your employer. Your employer may offer access to lower-cost lenders and real estate agents in your area, as well as home buying education courses.

    •  Your lender. Always ask your lender about any first-time homebuyer grant or down payment assistance programs available from government, nonprofit, and community organizations in your area.

    The Takeaway

    Being a first-time homebuyer can be especially challenging during a hot market, but if you can qualify for one of the many homebuyer programs in Illinois, or a federal program, you may be able to reduce costs.

    While you’re considering your options, keep in mind that borrowers who go with a mortgage from a private lender don’t necessarily have to come up with a 20% down payment. (And most buyers don’t.)

    Make your dream of being a homeowner come true with SoFi’s competitive mortgage rates and down payments as low as 3% for qualifying first-time homebuyers.

    View your rate


    FAQ

    Should I take first-time homebuyer classes?

    Yes! Good information is key to a successful home-buying experience for anyone, but especially for newcomers, who can easily be overwhelmed by the jargon, technicalities, and magnitude of applying for a mortgage and purchasing a home. First-time homebuyer classes can help. Indeed they are required for some government-sponsored loan programs.

    Do first-time homebuyers with bad credit qualify for homeownership assistance?

    Often they do. Many government and nonprofit homeowner assistance programs are available to people with low credit scores. And interest rates and other loan pricing are often competitive with those of loans available to borrowers with higher credit scores. That said, almost any lending program has credit qualifications, so it’s important to take all possible steps to improve your credit standing before you go house hunting.

    Is there a first-time homebuyer tax credit in Illinois?

    Not right now. State and local agencies administer mortgage credit certificate programs that allow borrowers to claim a portion of their annual mortgage interest as a federal credit every year. Both the Illinois Housing Development Authority and city of Chicago’s programs have been suspended.

    Is there a first-time homebuyer assistance program for veterans in Illinois?

    The state housing authority includes VA loans in its assistance programs. VA-backed home loans are available nationwide to eligible service members, veterans, and eligible surviving spouses. If you’re a veteran and you and/or your spouse are Native American, you may qualify for a VA direct loan.

    What credit score do I need for first-time homebuyer assistance in Illinois?

    The Illinois Housing Development Authority’s homebuyer programs require a minimum credit score of 640.

    What is the average age of first-time homebuyers?

    The typical first-time buyer is 33, NAR found.


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