First Time Homebuyer IL - Neighborhood Loans

Becoming a homeowner in Illinois is one of the best investments you can make to start securing your future. There is an endless number of topics and terms to educate yourself on throughout the homebuying process, but you will become familiar along the way.

The first step in buying a home is finding a lender that you trust. Regardless of what state you want to purchase a home in, there will be a handful of lending companies for you to choose from. Sit down with a few different lenders and learn what they can offer you as a borrower. Every lender operates differently, and one could benefit you more based on your scenario. Make sure the lender you choose is willing to answer all of your questions, explain everything clearly, and work in your best interest.

There are many programs offered through the Illinois Housing Development Authority (IHDA) and they operate through approved lenders like us. Below there will be information on several of those options available for first-time homebuyers in Illinois

Each of these programs is available to any homebuyer in Illinois that can meet the requirements. The goal of these programs is to simply assist any potential borrower in getting into a home. Most people find assistance one way or another when purchasing a home and finding the right program for you is an important step in the process. The main difference is the amount of assistance you can receive, so it might feel repetitive, but the information is important!

IHDA Access Repayable

The IHDA Access Repayable Mortgage offers borrowers 10% of the purchase price up to $10,000. This money can only be used for the down payment and closing cost assistance and is offered as an interest-free loan that is repaid monthly over ten years. This program can only be used for a 30-year mortgage with a fixed interest rate (known as 30-year fixed). On top of that, if eligible, this program can be combined with the Federal Housing Administration (FHA), Veteran Affairs (VA), or United States Department of Agriculture (USDA) programs. While this program may be great for first-time homebuyers, it is also available to repeat buyers throughout the state of Illinois.

IHDA Access Deferred

The IHDA Access Deferred Mortgage offers borrowers 5% of the purchase price up to $7,500. This money can only be used for the down payment and closing cost assistance and is offered as an interest-free loan. Instead of paying it back monthly over ten years, this loan is deferred for the life of your mortgage, meaning you don’t need to repay it until you sell, refinance, or pay off the mortgage. This program can only be used for a 30-year fixed mortgage. On top of that, if eligible, this program can be combined with the Federal Housing Administration (FHA), Veteran Affairs (VA), or United States Department of Agriculture (USDA) programs. While this program may be great for first-time homebuyers, it is also available to repeat buyers throughout the state of Illinois.

IHDA Access Forgivable

The IHDA Access Forgivable Mortgage offers borrowers 4% of the purchase price up to $6,000. This money can only be used for the down payment and closing cost assistance and is forgiven monthly over ten years, meaning it is a gift that does not have to be repaid. This program can only be used for a 30-year mortgage with a fixed interest rate (known as 30-year fixed). On top of that, if eligible, this program can be combined with the Federal Housing Administration (FHA), Veteran Affairs (VA), or United States Department of Agriculture (USDA) programs. While this program may be great for first-time homebuyers, it is also available to repeat buyers throughout the state of Illinois.

For each of these programs, competitive interest rates are offered but there are eligibility requirements. There are household income and purchase price limits (information below), but both new construction and existing homes are eligible. There is also a minimum credit score of 640 required.

Household Income Limits – for borrowers to be eligible, they must meet the income limits set in their county.

Purchase Price Limits – like the income limits, the home that borrowers are interested in must be below a certain value.

To view the income and purchase price limits in your county, take a look at this graph provided by IHDA: https://www.ihda.org/income-and-purchase-limits/

While not mandatory, there are housing counselors available to answer any questions and go over pre-purchase planning. For more information on this topic, read the information on IDHA’s website here: https://www.ihda.org/my-home/financial-literacy-pre-purchase-counseling/

For even more information on each of these programs, read this page on their website: https://www.ihda.org/my-home/getting-an-ihda-loan/

IHDA has recently released two new programs that are great for new homeowners looking to buy in 2021.

SmartBuy Program

If you’ve been hesitant about purchasing a home due to student loan debt, the SmartBuy Program could be exactly what you’re looking for. Your lender will pay 15% of the purchase price towards the payoff of your student loans up to $40,000. It also comes with a $5,000 deferred loan that can be used for down payment assistance or closing costs. This is a Fannie Mae program that can only be used with a 30-year fixed interest rate.

To qualify, you must have at least $1,000 in student loan debt and be current on payments. Income and purchase price limits are applied. All student loans must be paid off at closing by assistance or in combination with the borrower funds.

Opening Doors Program

The main goal of the Opening Doors program is to increase homeownership accessibly, promote ownership, and help stabilize communities. It can offer up to $6,000 in assistance that is forgiven over five years.

Remember to double-check with your lender and make sure they offer the program you want before you agree to anything. Each IHDA program is designed to help borrowers in a specific scenario and can be a great option for any homeowner.

Frequently Asked Questions About Illinois Down Payment Assistance

What Qualifies You for Down Payment Assistance?

Just like any loan – the two most common requirements to secure funding are income and credit score. When it comes to mortgages, there’s a lot more taken into consideration – but if you’re good in the other two – you shouldn’t have many complications throughout the process. Overall, it’s up to the lender you’re working with to approve or deny your application – and there’s many reasons why you could get approved or denied.

Who Pays Closing Costs in Illinois?

There will be closing costs associated with both the buyer and seller of a home. Closing costs will generally total between 1-3% of the home’s value. For the seller – the costs come with transferring the ownership of the property. For the buyer – the closing costs are related to securing your mortgage. One common misconception is that the down payment is apart of the closing cost – while somewhat correct – your down payment will be listed separately from the other closing costs. Before you get to the closing table, you will see the total fees listed with your down payment, so you know exactly how much to wire at closing.

Can You Negotiate Closing Costs with a Lender?

Simply put, yes! You’ll get a closing disclosure listing all your closing fees early into the mortgage process. If you see something that looks out of the ordinary or too high of a cost – discuss it with your lender and there might be another option. Lenders work with many third parties and the fees they charge can sometimes be negotiated or a different third party can be use. Sometimes lenders or real estate companies might cover your closing costs if they have a special program or deal going on! Make sure you shop around and find the best deal for your financial situation!

If you have any questions or would like to start the homebuying process today – reach out to Neighborhood Loans!