Believe it or not, closing costs are one of the biggest reasons potential homeowners will shy away from buying a home. It’s hard to save up that large sum of money purchasing a home requires, and even more difficult if you have any debts or bills. Not including your down payment, closing costs can include many different fees and payments that are usually out of your control.

The average price of a home in Illinois is around $225,000 and since most lenders say that closing costs will be 2-3% of the sale price, you can expect them to be between $3,000-$8,000. Statistics show that millennials today have more debt than ever and a payment of that much would deplete their entire savings account.

The charges you can expect to see on your Closing Disclosure (document your lender must provide within three days of closing outlining the costs of the transaction) may vary depending on the type of mortgage you are seeking. The most common charges will be the application fee, appraisal fee, attorney fees, closing or escrow fees, title and insurance premiums, taxes, and recording fees.

Therefore, buying a home without any assistance can feel impossible.

Luckily, mortgage lenders realize this and have worked with Government Sponsored Entities (GSE’s) like Fannie Mae and Freddie Mac to provide closing cost assistance through different mortgage programs. While these products are mainly designed to help with down payments (which you might also need), they ultimately assist with closing costs.

First, it’s best to understand how GSE’s work. Their primary goal is to provide liquidity, stability, and affordability to the mortgage market. They buy mortgages from lenders and either save purchased mortgages in their portfolio or package loans into mortgage-backed securities (MBS) that can be sold. MBS packaging guarantees timely payment of the principal and interest on underlying mortgages to the GSE’s. This attracts secondary mortgage market investors, which helps provide and expand available housing to those who wouldn’t invest in mortgages. Talk with your lender to learn more about the programs they offer with GSEs.

Another option you can take advantage of is home loans through the Illinois Housing Development Authority (IHDA). Similar to GSE’s, they operate through approved lenders like us! They’ve designed programs to help potential buyers anywhere in Illinois. Read below to learn about some of the different assistance programs they offer.

IHDAccess Forgivable

The Access Forgivable mortgage provides 4% of the purchase price and up to $6,000 in assistance for the down payment and closing costs. The funds are considered a gift and are forgiven monthly over ten years. The program is designed as a 30-year fixed-rate mortgage and is available to both first-time and repeat homebuyers across Illinois. Borrowers can finance this mortgage as an FHA, VA, USDA, or FNMA HFA Preferred. Both newly constructed and existing homes are eligible for financing. To be considered eligible, borrowers must have a minimum credit score of 640. Borrowers are also required to invest $1000 or 1% of the purchase price (whichever is greater) towards the transaction. Borrowers must complete homeownership counseling before they close. These programs are offered online or in-person and under certain circumstances, borrowers can be exempt from the course.

 

IHDAccess Deferred

The Access Deferred mortgage provides 5% of the purchase price and up to $7,500 in financial assistance for the down payment and closing costs. The financial assistance is offered as an interest-free loan and is deferred through the life of the mortgage. Borrowers will not need to repay the $7500 until they sell, refinance, or pay off the mortgage. The program is designed as a 30-year, fixed-rate mortgage and is available to both first-time and repeat homebuyers across Illinois. Borrowers can finance this mortgage as an FHA, VA, USDA, or FNMA HFA Preferred. Both newly constructed and existing homes are eligible for financing. To be considered eligible, borrowers must have a minimum credit score of 640. Borrowers are also required to invest $1000 or 1% of the purchase price (whichever is greater) towards the transaction. Borrowers must complete homeownership counseling before they close. These programs are offered online or in-person. Under certain circumstances, borrowers may be exempt to complete the course.

 

IHDAccess Repayable

The Access Repayable mortgage provides 10% of the purchase price and up to $10,000 in financial assistance for the down payment and closing costs. The financial assistance is considered an interest-free loan and is repaid monthly over 10 years. The program is designed as a 30-year, fixed-rate mortgage and is available to both first-time and repeat homebuyers across Illinois. Borrowers can finance this mortgage as an FHA, VA, USDA, or FNMA HFA Preferred. Both newly constructed and existing homes are eligible for financing. To be considered eligible, borrowers must have a minimum credit score of 640. Borrowers are also required to invest $1000 or 1% of the purchase price (whichever is greater) towards the transaction. Borrowers must complete homeownership counseling before they close. These programs are offered online or in-person. Under certain circumstances, borrowers may be exempt from the course.

 

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.

There are many different mortgage programs out there that your lenders will look at to find the one that best fits your needs. It’s important to ask any questions and make sure they address any concerns you have. If you have any questions or would like to get started with one of the home buying programs above, reach out to Neighborhood Loans to begin the process.

Pin It on Pinterest