Resources For First-Time Home Buyers In Illinois

Entering the world of first-time home buying in Illinois can feel like a rollercoaster ride, filled with excitement and a touch of overwhelm. The real estate scene is always shifting, making it important to approach this journey with knowledge and savvy. In this guide, we'll explore key tips tailored for first-time home buyers in Illinois, sharing valuable insights and strategies to help you navigate the dynamic real estate market and find your dream home.

Who Qualifies As A First-Time Home Buyer In Illinois?

In Illinois, a first-time home buyer is typically defined as individuals or families looking to purchase a home for the first time or those who haven't owned a home recently and are re-entering the housing market.

What Are The Requirements To Qualify For Assistance?

The criteria to qualify for assistance can differ depending on the program you're considering, but assistance typically has requirements on the following:

• Credit score: In Illinois, the credit score criteria for assistance programs can differ. While some programs accept lower scores, others prefer a minimum of 620 – 640. Generally, having a higher credit score improves your chances and can result in better terms and rates. Some programs may even offer credit counseling to help boost your score as part of their assistance package.
• Debt-to-income ratio: Assistance programs in Illinois generally require a debt-to-income (DTI) ratio ranging from 43% – 50%. This means your total monthly debt payments, including the mortgage, shouldn't surpass this percentage of your gross monthly income. However, some programs may be more lenient with DTI or offer extra help for borrowers with higher ratios.
• Income assistance limits: Income assistance limits in Illinois vary based on the program and where you're applying. They generally target individuals or families with moderate to low incomes, typically ranging from about 80% – 120% of the area's median income. To ensure you meet the eligibility requirements, it's essential to carefully review the income criteria of the specific assistance program you're interested in.

Illinois First-Time Home Buyer Programs

Buying your first home in Illinois can be thrilling and challenging. The Illinois Housing Development Authority (IHDA) offers several mortgage programs to help you get there. Let's dive into what these programs offer so you can make informed decisions.

IHDAccess Forgivable Mortgage

The Access Forgivable program provides up to 4% or $6,000 in assistance for down payment and closing costs, forgiven monthly over 10 years as a nonrepayable gift. It offers a 30-year fixed-rate mortgage with competitive interest rates. The program is open to both first-time and repeat home buyers statewide in Illinois, with eligibility requirements including income and purchase price limits, a minimum credit score of 640, contributing at least $1,000 or 1% of the purchase price, and completing homeownership counseling before closing, offered online or in-person.

IHDAccess Deferred Mortgage

The Access Deferred program offers up to 5% or $7,500 in assistance for down payment and closing costs as an interest-free loan, deferred until the mortgage is repaid through sale, refinance or payoff. This is coupled with a 30-year fixed-rate mortgage, open to first-time and repeat home buyers statewide in Illinois. Requirements include meeting income and purchase price limits, maintaining a minimum credit score of 640, contributing at least $1,000 or 1% of the purchase price, living in the home as the primary residence and completing homeownership counseling before closing, available online or in-person.

IHDAccess Repayable Mortgage

The Access Repayable program offers up to 10% or $10,000 in interest-free loan assistance for down payment and closing costs, repayable monthly over 10 years. It also provides a 30-year fixed-rate mortgage with competitive rates, available to both first-time and repeat home buyers statewide in Illinois. Requirements include meeting income and purchase price limits, maintaining a minimum credit score of 640, contributing at least $1,000 or 1% of the purchase price, living in the home as the primary residence and completing homeownership counseling before closing, offered online or in-person.

First-Time Home Buyer Grants In Illinois

First-time home buyer grants in Illinois can be a game-changer for those venturing into homeownership. These grants, typically offered by state and local entities or nonprofits, provide financial support to tackle challenges, such as down payments and closing costs. Let's explore how these grants can simplify and enhance your home buying experience in Illinois.

Downpayment Plus Programs

Downpayment Plus aims to help home buyers who meet income criteria by covering their down payment and closing expenses. This support is provided in the form of a forgivable grant distributed on behalf of the borrower upon closing their mortgage with a participating financial institution affiliated with FHLBank Chicago. These grants are gradually forgiven over a span of 5 years.

To participate in Downpayment Plus (DPP) programs, members need to sign a Program Agreement with FHLBank Chicago. Those who provided DPP funds in the previous year must submit an Annual Certification Form before reserving new funds, as well as acquirers of former members with active DPP grants within the 5-year retention period. Access to DPP programs is via eBanking, FHLBank Chicago's member-only site, after authorization from the institution's Member Security Administrator. Reservations are handled on a first-come, first-served basis, and properties eligible for DPP can be in any state where the member does business. In DPP, the member initiates or funds the first mortgage; for DPP Advantage, a nonprofit entity does so.

 

Loan Types For Illinois First-Time Home Buyers

If you're a first-time home buyer in Illinois, you've got quite a few loan options tailored just for you. From low down payments to fixed or adjustable rates and even government-backed loans, there's something to fit your financial needs. Let's take a closer look at the range of loan types available to help you feel more confident as you navigate the home buying journey.

Conventional Loans

Conventional loans are mortgage loans that are not insured or guaranteed by the government. Instead, they are offered by private lenders, such as banks, credit unions and mortgage companies. Here are some key highlights of conventional loans:

• Eligibility requirements: To qualify for a conventional loan, borrowers typically need stable employment and income history, along with a debt-to-income ratio below 43% – 50%.
• Down payment requirements: When it comes to conventional loans, the down payment requirement usually stands at 20% of the home's purchase price. However, some programs offer lower options, like 3% – 5% down, although this may entail private mortgage insurance (PMI).
• Credit score requirements: Credit score requirements typically hover around 620, but having a higher score, especially 740 or above, can lead to better terms and rates. Lenders use credit scores as a measure of a borrower's creditworthiness and financial responsibility, impacting the loan approval process and interest rates offered.

FHA Loans

FHA loans are government-backed mortgages for low- to moderate-income home buyers with less-than-perfect credit scores. They're insured by the FHA, enabling lenders to provide better terms and lower down payment requirements compared to conventional loans. Key highlights include:

• Eligibility requirements: Borrowers should also have a debt-to-income ratio of 57% or less, stable employment and income, and the property being financed must meet FHA standards. Additionally, FHA loans require both upfront mortgage insurance premiums (UFMIP) and annual mortgage insurance premiums (MIP).
• Down payment requirements: FHA loans typically require a minimum down payment of 3.5% of the purchase price. It's important to note that the down payment must be paid upfront at the time of closing. Additionally, borrowers with credit scores below 580 may need to make a larger down payment of at least 10%.
• Credit score requirements: The credit score requirements for FHA loans can vary depending on the lender and other factors, but generally, a minimum credit score of 580 is required to qualify for the FHA's minimum down payment of 3.5%. Borrowers with credit scores between 500 and 579 may still be eligible for an FHA loan, but they may need to make a larger down payment of at least 10%.

VA Loans

VA loans are specialized mortgage options created to aid qualified veterans, active-duty service members and certain military spouses in buying homes. Here are key highlights of VA loans:

• Eligibility requirements: Eligibility for VA loans is based on specific criteria: military status, including veterans, active-duty service members, National Guard or Reserve members and certain surviving spouses; length of service, which typically requires a specific period of service during wartime or peacetime as determined by the VA.
• Down payment requirements: VA loans typically do not require a down payment for eligible borrowers. However, it's essential to note that while VA loans do not require a down payment, borrowers may still need to pay certain closing costs and fees associated with the loan.
• Credit score requirements: Credit score requirements for VA loans can vary by lender, but generally, a minimum credit score of around 620 – 640 is recommended. However, some lenders may accept credit scores as low as 580 or even lower in certain cases.

Illinois First-Time Home Buyer FAQs

Becoming a first-time home buyer in Illinois can be complex, leading to various questions. Understanding eligibility, financial aid options and available programs is crucial. Here are common inquiries regarding first-time home buyers and programs in Illinois.

How much do I have to put down to buy a house in Illinois?

The down payment amount needed to purchase a house in Illinois can vary depending on the type of mortgage loan you opt for. Conventional loans typically necessitate a down payment ranging from 3% – 20% of the purchase price, while FHA loans usually mandate a minimum down payment of 3.5%.

VA loans for eligible veterans commonly require no down payment and USDA loans for rural areas may also waive the need for a down payment. It's advisable to consult with lenders to ascertain the specific down payment requirements based on your chosen loan type and financial circumstances.

What are the requirements for first-time home buyers in Illinois?

First-time home buyers in Illinois generally need to meet criteria, such as income and purchase price limits, maintain a minimum credit score, contribute a down payment (which can vary based on the loan type) and complete homeownership counseling before closing.

What is the $7,500 first-time home buyer grant in Illinois?

The $7,500 first-time home buyer grant in Illinois is a program that offers eligible first-time home buyers financial assistance of up to $7,500, which can be used for down payment and closing costs.

The Bottom Line

First-time home buyer assistance programs in Illinois offer valuable support to individuals aspiring to own their first homes. These programs provide financial assistance, down payment options and favorable terms to eligible applicants, making homeownership more achievable. If you're considering buying your first home in Illinois, now is the time to act and explore these assistance programs further. Start the mortgage application process online today and take the first step toward realizing your dream of owning a home.