Illinois First Time Home Buyer Programs

The state of Illinois recently revised some of their first time home buyer programs. These are great examples of what you’ll see from state-to-state.

The IHDA Home Start Loan is a 30 Year Fixed FHA loan with a pretty low rate. It’s 4.75% which is comparable to the rate that you would get on a normal FHA loan.

There are the typical caveats:

• Buyer must be first time home buyer (no ownership for 3 years) OR Veteran (not a VA loan)
• Minimum Credit Score of 640
• Maximum DTI of 43%
• Cannot use other programs like the MCC – Tax Smart
• Borrower must complete Home Buyer Education
• Borrower must bring 1% of purchase price into the deal and show proof it was paid
• Regular IHDA income limits apply as do purchase price limits

This is a good safe program, but the real value is in some of the other options they’ve added.  There are two that are pretty interesting:

Tax Advance Loan

This is a second loan for 3% of the price, up to $6,000.  It carries a really nice interest rate – 0% – through June of next year.  At that point, it would turn into a 10 Year Fixed loan with a rate .5% above that 4.75% rate on the first mortgage.  There are fees of $300 for the program, but $100 is reimbursed if you pay off your loan with your tax return.  This date due may be adjusted based on the extension of the government tax credit.

Down Payment Assistance Loan

This is also a pretty neat program.  It is a forgivable second mortgage that can cover 3% of the down payment, up to $6,000.  The loan then forgives at a rate of 1/120 per month.  There is one huge downside to this loan:  It increases the rate of the first mortgage by .5%.   It is very important to review the numbers on this loan.

If someone had a $200,000 home and the full $6,000 assistance available, it would look like this.  Roughly speaking, the first mortgage costs about $60/month more.  The state forgives the second mortgage at the rate of $50/month.  If you’re in your home for quite some time and you don’t need the DPA to close, you may not wish to pursue this since your entire loan amount is .5% higher forever.

How to apply for Illinois first time home buyer programs

Like most states, Illinois only offers these programs through a certain number of banks.  You can find links to the IHDA site and the official lenders through the Illinois First Time Home Programs page.