If you’re a first-time home buyer or a repeat buyer in Illinois, the state’s housing development authority offers down payment assistance, grants, and loan programs that can help you overcome the barriers to home ownership.
Almost all of the Illinois Housing Development Authority’s (IHDA) programs are valid in any county in Illinois.
If you haven’t purchased a home in the last three years, you’re considered a first-time homebuyer (and may be eligible for these programs), but other programs help all types of buyers. These programs are worthwhile to investigate regardless of your financial condition. If you need help buying a home, you should consult with a financial counselor, who can help examine your unique financial circumstances and answer your questions.
How First-Time Home Buyer Programs in Illinois Work
The process for obtaining a loan through the Illinois first-time home buyer program is identical to that of obtaining any other mortgage, however, there may be some additional documentation.
However, keep in mind the requirements for receiving the entire down payment aid amount. For example, under the IHDAccess Forgivable program, you must reside in your home for ten years to receive full loan forgiveness. In rare situations, you may be subject to a “recapture tax” if you leave your home too quickly, but IHDA pledges to repay you if this is the case.
The Illinois Housing Development Authority outlines the general procedure below.
STEP #1: FIND AN IHDA-APPROVED LENDER
Only lenders recognized by the Illinois Housing Development Authority may issue IHDA loans with down payment assistance. On the IHDA Mortgage website, you can look for an IHDA lender in your location.
STEP #2: GET PREPARED
A loan representative at the lender you choose will ask you to submit financial information in order to determine which programs you might be eligible for and how much you could borrow — as well as the interest rate and fees you would encounter. You may want to do this with numerous lenders to determine where you can obtain the greatest offer.
STEP #3. TAKE A HOMEBUYER EDUCATION COURSE
Before you can close on your loan, the Illinois Housing Development Authority requires you to complete a homebuyer education course. The course you take must fulfill federal Department of Housing and Urban Development (HUD) or National Industry Guidelines for Homeownership Education and Counseling standards.
STEP #4: LOOK FOR A HOME
With your pre-qualification letter in hand, you can look for a home in your price range with fair certainty that you will be approved for the home. You may wish to engage a realtor to assist you in the process of submitting offers, negotiating with home sellers, and eventually having the home inspected and appraised once your offer is approved.
STEP #5: COMPLETE YOUR LOAN APPLICATION
With a purchase contract, your IHDA lender will complete the information needed for your entire loan application and send it to underwriting to ensure you are fully qualified for the mortgage. Your lender is responsible for ensuring that you meet all of the criteria for the IHDA programs, including income limits and credit score requirements.
STEP #6: COMPLETE THE LOAN
You’ll sign a stack of documents at the closing table before receiving the keys to your new home.
Requirements for the Illinois First-Time Home Buyer Programs
The requirements for each of the state’s first-time home buyer programs are comparable.
|Program name||Credit score minimum||DTI ratio maximum||Maximum income limit||How long you have to live in a home|
|IHDA Mortgage||640||45%||$102,000 in most counties, a range in others; up to $128,760 in Kendall County||Unknown|
|IHDAccess Forgivable||640||45%||$102,000 in most counties, a range in others; up to $128,760 in Kendall County||10 years for full loan forgiveness|
|IHDAccess Deferred||640||45%||$102,000 in most counties, a range in others; up to $128,760 in Kendall County||Unknown|
|IHDAccess Repayable||640||45%||$102,000 in most counties, a range in others; up to $128,760 in Kendall County||Unknown|
Illinois first-time home buyer loans
If you’re a first-time home buyer in Illinois with a 20% down payment, you can acquire a low-interest conventional loan. Furthermore, you will never have to pay for private mortgage insurance (PMI).
Of course, few first-time buyers have saved enough for a 20% down payment. But the good news is that you don’t require much. Not by any means.
Borrowers can sometimes get into a new home with as little as 3% or even 0% down by using one of the following low-down-payment mortgage programs:
- Conventional 97: Freddie Mac or Fannie Mae. A 3% down payment is required, as is a credit score of at least 620. After a few years, you should be able to stop paying mortgage insurance.
- The Federal Housing Administration FHA loans. A 3.5 percent down payment and a minimum credit score of 580 are required. However, you will be required to pay mortgage insurance until you refinance to a different type of mortgage, relocate, or pay off your loan.
- VA loans: They are only available to veterans, active military personnel, reservists, and members of the National Guard. There is no deposit necessary. The minimum credit score varies by lender, but it is often 620. There will be no ongoing mortgage insurance after the closing. If you are eligible, apply for one of the best mortgages available.
- USDA loan: For those with low-to-moderate incomes who are purchasing a home in a rural location. There is no deposit necessary. Credit score requirements vary by lender, but 640 is common. Mortgage insurance rates are low.
- IHDA Mortgage: Offers reasonable interest rates and can be combined with down payment assistance and tax-free mortgage credit certificates.
It is important to note that government loan programs (such as FHA, VA, and USDA home loans) require you to purchase a principal house. This implies you can’t utilize these loans to purchase a second home or an investment property.
Furthermore, most programs allow you to use gifted funds or down payment assistance (DPA) to pay for your down payment and closing costs. Depending on the mortgage loan you choose, you may be able to move into your new home with little money out of pocket.
If you’re not sure which program to choose for your first mortgage, your lender can assist you in finding the best fit based on your financial situation and home-buying objectives.
First-time home buyer Grants in Illinois
IHDA Mortgage offers a variety of down payment assistance programs to qualified borrowers. Cash assistance is limited to $10,000 or 10% of the purchase price, whichever is less. And this is a second mortgage, not a grant.
Down payment help may take the following forms, depending on the IHDA program you qualify for:
- A forgiving loan: This is a second mortgage that is forgiven over a period of five or ten years. If you stay in the home for that long, you won’t have to pay anything back. However, you must repay the loan if you sell your home or refinance your mortgage before the loan period expires.
- A deferred second mortgage: Only when you refinance, sell your home, or pay off your primary mortgage does your loan balance become due. This loan has no interest attached to it.
- A repayable second mortgage: This interest-free loan is repaid over ten years with 0% interest monthly payments.
IHDA also has a SmartBuy program that can assist first-time home buyers who wish to buy a home but have significant student loan payments.
You may be eligible for $5,000 in down payment help as well as 15% of your purchase price (up to $40,000) toward student loans through SmartBuy.
As of May 20, 2022, SmartBuy is no longer accepting new locks. However, the program may be reinstated if new funds are made available. So make sure to check its website for availability.
Purchasing a home in one of Illinois’ largest cities
Unsurprisingly, Chicago has the highest home prices of the state’s three major cities. However, as of April 2022, those prices were unchanged year on year. So, at the very least, Chicago home buyers aren’t facing the sky-high inflation found in many other real estate markets around the country.
Aurora and Joliet real estate values both increased. Nonetheless, they are less expensive than in Chicago.
First-time home buyers in Chicago
According to Realtor.com, the median list price in Chicago in April 2022 was $349,900. That was the same as last year.
Your down payment options at that median price could be:
- $10,500 for a 3% down payment
- $69,980 for a 20% down payment
The City of Chicago offers numerous programs to help first-time home purchasers. However, the information on its website is minimal.
“If you enter your name, address, ZIP code, and daytime telephone number, we will send you a ‘Home Ownership Kit’ with information on home ownership programs.” The material on each program tells you what steps to do next if you want to join in the program.”
Click the “Get Started Online” button on this City of Chicago webpage to request your kit. More information is also available by phoning (312) 744-0281.
First-time home buyers in Aurora
According to Realtor.com, the median list price in Aurora in April 2022 was $275,000. This was an increase of 12.3 percent year on year.
Your down payment options at that median price could be:
- $8,250 for a 3% down payment
- $55,000 for a 20% down payment
The City of Aurora offers up to $3,000 in DPA to most qualifying home buyers, with the amount increasing to $5,000 if you purchase in a Neighborhood Revitalization Strategy Area (NRSA). To qualify, however, your household income cannot exceed 80% of the Area Median Family Income. In 2022, a four-person household would earn $83,350.
You must also commit to living in the home and keeping it in good condition for at least three years. This application form contains additional information.
Aurora is one of the communities eligible for the Illinois Assist Homeownership Program. This appears to provide significant grants (meaning you don’t have to repay the money) to qualified home buyers.
First-time home buyers in Joliet
According to Realtor.com, the median list price in Joliet in April 2022 was $250,000. This was an increase of 6.4 percent year on year.
Your down payment options at that median price could be:
- $7,500 for a 3% down payment
- $50,000 for a 20% down payment
The Illinois Assist Homeownership Program is described on the City of Joliet’s website. This provides a 3% to 7% cash grant to qualified home buyers to cover closing expenses and down payment assistance. Furthermore, because it is a grant, you are not required to repay it.
Where can I get help buying a home in Illinois?
All of the organizations listed above should be willing to offer free help to any first-time home buyer in Illinois or their surrounding area.
In addition to our recommendations, the US Department of Housing and Urban Development (HUD) offers a few lists of statewide, regional, and local resources.
Illinois first-time home buyer resources at the state and regional levels
- To aid first-time home purchasers, certain localities employ HUD’s HOME Investment Partnership Program. Find the contacts for your local HOME program.
- IHDA assists people with homeownership through mortgage loans, repair grants, and foreclosure avoidance aid, as well as by promoting multifamily rental housing and community building.
- Housing counseling agencies: For free or low-cost counseling services for buying, renting, defaults, foreclosures, credit concerns, and reverse mortgages, contact a HUD-approved housing counseling agency. A housing counselor can assist you in connecting with homeownership aid programs in your community. Here you can look for a HUD-approved housing counseling agency.
- Housing Resources in Illinois
- Housing Assistance from the Illinois Department of Commerce and Economic Opportunity
Illinois home buyer resources broken down by city/town
- DuPage County Community Housing Association
- City of Chicago, Department of Housing: Provides a variety of programs and services to Chicago’s prospective home purchasers and homeowners.
- Affordable Housing Community Partners (Lake County)
- Housing Programs in the Village of Oak Park
- Home Advantage Program of Cook County
On HUD’s Illinois first-time home buyer page, you may also locate home buyer tools and contact information for specific cities.