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First-Time Home Buyer Programs in Illinois For 2018

Liz Smith
Illinois First-Time Home Buyer Programs

If you love hot dogs, deep dish and hockey, chances are Illinois is already on your radar. Considering that median home prices are 15% lower than the national average and mortgage rates are on par with the national average, it is all the more attractive a place to move. Luckily, the federal and Illinois state governments have created mortgage programs to help first-time home buyers navigate and afford the purchase. No matter your financial situation, these programs are worth exploring. Since it can be challenging to decide which mortgage is right for you, check out our detailed breakdowns and consider enlisting the help of a financial advisor.

Federal First-Time Home Buyer ProgramsFHA Loans Pros – Low down payment
– Flexible credit requirements Cons – Larger down payment needed for those with a low credit score Eligibility – At least 3.5% of the home’s value as down payment
– Credit score of at least 500 Best For – Those who don’t have a great credit history or sufficient funds for a down payment

The U.S. Federal Housing Administration backs FHA loans, which are a great option for home buyers of any background. While conventional loans require a 20% down payment, you’ll only need to put 3.5% of your new home’s value down at the time of purchase.

In order to receive maximum benefits, you’ll need a FICO® credit score of at least 580. If your score is lower, you’ll be required to make a down payment closer to 10%, which is still half of a typical down payment. Even with the credit score requirement, an FHA loan is one of the easiest federal programs to qualify for.

VA Loans Pros – Up to 100% coverage for your home’s value
– Low closing costs
– No private mortgage insurance requirement Cons – Long application process
– Requires VA fund payment Eligibility – Must be a current or former military member, spouse or another beneficiary
– Credit score of at least 620 Best For – Veterans with low income or limited savings

The Department of Veterans Affairs insures VA loans, but third-party mortgage lenders provide them. They address a common financial problem among military families. They do not require any down payment or private mortgage insurance (PMI).

To qualify, you will need a FICO® credit score of at least 620. In addition, you need to pay a VA funding fee. These can range anywhere from 1.25% to 2.4% of your home’s value, depending on whether or not you make a down payment.

Aside from the funding fee, there are almost no other extraneous costs attached to a VA loan. Plus, closing costs tend to be cheaper than those of conventional and other mortgages. These initial savings can help you shore up your finances and save more for the future.

USDA Loans Pros – No down payment requirement
– Low credit requirements Cons – Only available to those that don’t qualify for a conventional loan Eligibility – Must earn less than 115% of the adjusted U.S. median income
– Home is in an eligible area Best For – Low- to mid-income Americans looking to buy in a rural or suburban area

Loans from the United States Department of Agriculture, which are legally known as the “Section 502 Single Family Housing Guaranteed Loan Program,” aim to attract home buyers to rural, or semi-rural, places throughout the U.S.

So long as your credit score is decent, you don’t need to pay any down payment on a USDA loan. If your credit score falls a bit lower on the FICO® scale, you may have to pay a down payment of around 10%. That’s still significantly lower than the typical 20%.

There’s one important requirement to keep in mind, though. You will only be eligible for a USDA loan if your income level is lower than 115% of the current U.S. median income. If you make more than that or have qualified for a conventional loan, you’ll have to use another program.

Good Neighbor Next Door Program Pros – Flat 50% discount on your new home
– Can sell the home after three years and keep the equity Cons – Only available in select areas
– Must live in the home for at least three years after purchase Eligibility – Must be a police officer, firefighter, emergency medical technician or a pre-K to 12th grade teacher Best For – Local public servants with little savings set aside for a down payment

The Good Neighbor Next Door Program is one of the most unique federal mortgage offerings. Although technically not a loan, it provides emergency personnel and teachers with a 50% discount on the purchase price of a new home. To pay for the home, you could get a conventional, VA or FHA mortgage. Or you could simply pay cash.

Saving half on your home’s value doesn’t come without preconditions, of course. First, your home must be within what the Department of Housing and Urban Development (HUD) determines is a “Revitalization Area.” Furthermore, you must agree to make the home your primary residence for at least three years. The good news is that if you meet these terms, you can sell the home after three years pass and retain any equity and profit.

Fannie Mae/Freddie Mac Pros – Low down payment requirements
– Very low credit requirements
– Several loan styles available Cons – Can carry high interest rates Eligibility – In some cases, no income requirements Best For – Anyone looking for a low down payment benefit that doesn’t qualify for other federal programs

Freddie Mac and Fannie Mae are mortgage lenders that the federal government created, and each has a number of first-time home buyer options. While they’re technically two different entities, they offer  similar benefits geared to anyone buying a first home.

The HomeReady® loan from Fannie Mae is a great choice for anyone who’s strapped for cash, has a FICO® credit score of at least 620 and makes an income at or near the U.S. median. The biggest benefit is that it only requires 3% of your home’s value as a down payment. You must have private mortgage insurance at the time of your purchase. But you can cancel it once you’ve accrued 20% equity in your new home.

If that doesn’t work for you, check out Home Possible® mortgages from Freddie Mac. There are two variations: “Home Possible: 95% LTV” and “Home Possible Advantage: 97% LTV.” LTV stands for loan-to-value, indicating that your down payment only has to be 5% or 3%, respectively. The Home Possible loan comes in 15- to 30-year fixed-rate and 5/5, 5/1, 7/1 and 10/1 adjustable-rate terms. It also has that cancelable private mortgage insurance we talked about above. Perhaps best of all, you won’t need a strong (or any) credit history to qualify. The Home Possible Advantage mortgage is essentially the same, except it has credit requirements and only comes in fixed-rate variations.

NADL Pros – Low credit requirements
– No down payment requirement
– No private mortgage insurance requirement
– Low closing costs Cons – Strict eligibility rules Eligibility – H ome must be located on allotted lands, Alaska Native corporations, Pacific Island territories or federally-recognized trusts Best For – Native Americans that lack savings for a typical down payment

A Native American Direct Loan (NADL) can help Native American veterans and their spouses buy a new home. This VA-backed mortgage comes with impressive perks, like 0% down payments and a pre-specified interest rate. This rate currently sits at 4.5%, though that is subject to change based on market and Prime Rate fluctuations.

Just like normal VA loans, NADLs don’t require high credit score minimums or private mortgage insurance. Furthermore, NADLs also have significantly lower closing costs than a standard home loan.

Illinois First-Time Home Buyer Programs

Illinois First-Time Home Buyer Programs

The Illinois Housing Development Authority (IHDA) created the Access Mortgage program to help state residents realize their dreams of homeownership. It offers 30-year fixed-rate loans, as well as down payment and closing cost assistance up to $10,000. Home Access is available in every Illinois county through a network of trusted partners.

To qualify, the property must be your primary residence and you can’t have owned a residential property in the last three years. Most programs also require a FICO® credit score of at least 640 and completion of a homeownership course, in addition to certain household income and purchase price limits. For some loans, borrowers only need to contribute $1,000 or 1% of the home’s price upfront.

IHDAccess Forgivable Pros – Very low down payment requirements
– Forgivable loan up to $6,000 for down payment and closing cost assistance
– Competitive interest rates Cons – Strict household income and purchase price limits Eligibility – Credit score of at least 640
– Must complete homeownership counseling Best For – Low-income individuals who need help with the upfront costs of a home purchase

With Access Forgivable, the biggest benefit is in the title. Borrowers receive down payment and closing cost assistance of 4% of the home’s purchase price up to $6,000, which is forgiven if you can’t pay it back in 10 years. Plus, the mortgage interest rate is fixed. You’ll know the full cost of the loan as soon as you sign up.

As with all IHD programs, you’ll have to meet income and purchase price limits and complete some homeownership education. If you qualify, it’s more than worth it. With a minimum contribution of $1,000 or 1% of the home’s price, you could buy a new home for next to nothing.

IHDAccess Deferred Pros – Very low down payment requirements
– Deferred loan up to $7,500 for down payment and closing cost assistance
– Competitive interest rates Cons – Strict household income and purchase price limits Eligibility – Credit score of at least 640
– Must complete homeownership counseling Best For – Mid- to low-income individuals who need help with the upfront costs of a home purchase

Much like Access Forgivable, Access Deferred offers Illinois homeowners in every county a safe, 30-year fixed rate mortgage. It also offers the same deal where you only need to provide as little as $1,000 or 1% of the purchase price to secure your first home. 

To help with the upfront costs of homeownership, it also provides 5% of the home’s purchase price (up to $7,500) in down payment and closing cost assistance. What separates the payment assistance with Access Deferred from other IHD programs is that the loan is interest-free. What’s even better: you don’t have to pay it back until you’ve refinance your home, sell it or pay it off fully.

IHDAccess Repayable Pros – Very low down payment requirements
– Interest-free loan up to $10,000 for down payment and closing cost assistance
– Competitive interest rates Cons – Strict household income and purchase price limits Eligibility – Credit score of at least 640
– Must complete homeownership counseling Best For – Anyone that doesn’t have enough savings for a typical down payment

Access Repayable works much in the same way that Access Forgivable and Access Deferred do. It provides a fixed-rate loan with a competitive interest rate and borrowers only have to contribute as little as $1,000 or 1% of the home’s purchase price out-of-pocket. 

Access Repayable, though, focuses  on helping low- and mid-income individuals who can’t afford standard down payments. The program provides 10% of the home’s purchase price, up to $10,000, in down payment assistance. Best of all, the down payment loan is interest-free. Unlike with the other IHD programs, you will have to pay this one back over a 10-year period.

1stHomeIllinois Pros – Very low down payment requirements
– Up to $7,500 for down payment and closing cost assistance
– Competitive interest rates Cons – Strict household income and purchase price limits
– Cannot be used for newly constructed homes Eligibility – Credit score of at least 640
– Must complete homeownership counseling Best For – Mid- to low-income individuals looking to live in Boone, Cook, DeKalb, Fulton, Kane, Marion, McHenry, St. Clair, Will or Winnebago counties

You can combine 1stHomeIllinois with a 30-year fixed-rate FHA, VA, USDA or conventional mortgage. It also provides a grant of up to $7,500 to help with your down payment and closing costs. Can’t afford to pay it back? So long as you live in the home for at least five years, the grant is forgiven. 

The only catch for 1stHomeIllinois is that you must be buying a home in Boone, Cook, DeKalb, Fulton, Kane, Marion, McHenry, St. Clair, Will or Winnebago counties. Even if you weren’t expecting to move to one of these counties, this program should make them look much more attractive.

Tips to Incorporate Your New Mortgage Into Your Financial Life

Illinois First-Time Home Buyer Programs
  • No matter where you buy a home, the purchase will impact your budget. It’s probably wise to seek counsel with a professional. SmartAsset financial advisor matching tool will match you with up to three potential, certified advisors so you know you’re making educated decisions.
  • Determine how much house you can afford before you begin shopping for homes. This way, your mind and wallet will be in sync.
  • Just because you qualify for a mortgage, doesn’t mean it’s right for you. Investigate the lenders, interest rates and down payment requirements of each choice. But buying a home is so much more than forking over a down payment. Be sure you know the closing costs, inspection fees and moving expenses too.

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The post First-Time Home Buyer Programs in Illinois For 2018 appeared first on SmartAsset Blog.

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