Cook County, IL – First Time Home Buyer Programs
Are you a first time home buyer looking to purchase a home in Cook County, Illinois? On this page you can learn about some of the different types of mortgage programs that are available to first time home buyers. You may also view down payment assistance programs that are currently being offered in Cook County, IL.
Cook County, IL – First Time Home Buyer Loans
Below are some mortgage programs that are available to first time home buyers.
Types of Mortgages:
- Conventional Loans – Conventional loans offer the best loan terms to borrowers with good or excellent credit, as well as those who can afford to place a larger down payment. If you are able to put 20% or more down, you will be able to avoid paying private mortgage insurance (PMI). However, conventional loans also offer low down payment options, such as programs that only require 3% down.
- FHA Loans – FHA loans are a good option for borrowers who may not be able to qualify for a conventional loan. The qualification requirements for FHA loans are much more lenient than conventional loans. This includes options for home buyers with credit scores as low as 500 (in order to qualify for a 3.5% down payment, you must have a credit score of at least 580).
- USDA Loans – USDA loans provide home buyers the opportunity to purchase a rural home without any down payment. These loans are intended for borrowers with low-to-moderate income. In addition to not requiring any money down, you can also finance the closing costs into the loan. This means you can essentially buy a home with no money out of pocket!
- VA Loans – Active duty military members and veterans can apply for a VA loan which allows you to buy your first home without any down payment. These loans are not available to the general public, but exclusively to military/veterans.
- Jumbo Loans – Any mortgage that does not meet the conforming loan limits is a jumbo loan. You can lookup the 2020 conforming loan limits for DuPage County, IL (or any other county) using this conforming loan limit lookup tool. If you want to buy a more expensive home, and have the income to qualify, jumbo lenders offer loan amounts up to $5,000,000.
- Non-Prime Loans – If you do not qualify for any of the above types of loans, you may consider a non-prime or non-qm loan. These programs are helpful to people with a variety of credit issues (such as low credit scores, or a recent bankruptcy). Non-prime loans do not require any waiting periods after a bankruptcy, and most non-prime lenders allow credit scores as low as 500. Regardless of your situation, you may consider learning more about non-prime loans if you do not qualify for any of the other types of mortgages featured above.
These are some of the mortgage options that are available to first time home buyers.
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Cook County, IL – Down Payment Assistance Programs
First time home buyers in Cook County may be eligible to receive down payment assistance. This includes programs that are offered statewide, as well as a programs offered exclusively in Cook County and the City of Chicago. You can learn more about these programs below.
Cook County Local Programs
Though almost entirely made up of Chicago, there are two programs dedicated specifically to helping low- to medium-income homebuyers with down payment assistance outside of the city’s limits but still within the county’s limits.
Housing Authority of Cook County – Homeownership Program
Serving over 15,000 families and currently the second largest provider of affordable housing in Illinois, the Housing Authority of Cook County (HACC) works tirelessly to help their clients achieve self-sufficiency. Their main goal is to promote affordable housing, healthy living conditions and economic independence to those in need in suburban Cook County.
Their first-time homebuyer Homeownership Program is specifically for those that prove to be eligible through the Housing Choice Voucher Program. Following successful application to that program, the Homeownership Program becomes available.
As mentioned, the applicants must first be approved for the Housing Choice Voucher Program. To obtain this, qualifications include:
- Qualifying as a family unit following the definition put forth by the HUD and HACC.
- Income must be at or below the determined levels, including very low- to moderate-incomes.
- Family members must be legal residents of the United States.
- Social security numbers must be provided.
- Consent must be given to HACC to allow them to collect and use information on the family.
In suburban Cook County, the rules are a bit different than other down payment assistance programs.
- The buyer must be a first-time homebuyer.
- Excluding disabled and elderly families, the gross annual income must be at least $17,160 without counting any welfare assistance.
- The buyer must be continually employed for two years, again excluding the disabled and elderly.
- No money can be owed to the HACC or other housing authority.
- An HACC homeownership briefing must be attended as well as an HUD approved homeownership counseling. This counts only if the session discusses both credit counseling and budgeting.
- The buyer must have at least 1% of the down payment cost to pay with their own money.
West Cook Homeownership Center – Down Payment Funds
Located in Forest Park, the West Cook Homeownership Center is certified by HUD as a counseling agency. While anyone is eligible to apply for services, their main areas of service include Austin, Elmwood Park, Melrose Park, North Riverside, Westchester and others.
Currently, the organization runs a down payment assistance program comprised of grants and forgivable loans. These are made possible through their lending partners and come in two main forms. The first, the West Cook Advantage Program, is specifically for buyers looking to purchase rehabbed homes. The second, the Cook County HOME Funds, are for first-time buyers with lower household income limitations. Should these two not work, the center does still have more assistance through other grants, loans and incentives available upon further request for aid.
West Cook Advantage Program
- Home purchased must be a rehabbed property.
- Financial assistance can go up to but not exceed $10,000 in forgivable grants and loans.
- Household income can be no more than 120% of the average median income of the area as determined by HUD. Even so, some properties require that the income be no more than 80% of the median.
Cook County HOME Funds
- Borrower must be a first-time homebuyer.
- The household income cannot exceed 80% of the local average income median.
- Financial assistance awarded will be no more than $15,000 for new homes purchased in Cook County. If this home is bought using the Western Cook Advantage Program, an additional $5,000 may be provided.
Chicago Down Payment Assistance Programs
With as large as Chicago is, it’s no wonder there are so many financial assistance programs for down payment fees. While many of these institutions service both Chicago and its surrounding neighborhoods, there are a few that aid city residents directly. This includes three primary programs which are each featured below. These are the Neighborhood Lending Services of Chicago – Home Purchase DPA program, the Chicago Infrastructure Trust – Market Rate Homebuyer Assistance Program, and finally the Chicago Downpayment Plus Programs by Federal Home Loan Bank.
Neighborhood Lending Services of Chicago – Home Purchase
The Neighborhood Lending Services of Chicago, Inc. (NLS) is a nonprofit Illinois Residential Mortgage lender that provides affordable, fixed-rate mortgages for families of low- to moderate-income levels in Chicago. They are also HUD-certified and are members of NeightborWorks America. Because they have an array of loans to offer for home buying help, each qualifying family is presented with the most affordable mortgage for their situation on top of additional help with down payment and closing costs.
No matter what mortgage you end up being fitted to, there remain a set of rules put in place by the NHS for all that apply.
- The mortgaged property must be used as the principal residence. It cannot be a vacation home and no more than 25% of it can be used as a business space.
- Every single loan option requires at least a 3% down payment of your own money for a property with one unit and 5% for a property with two units. The NLS will check to make sure this money has been within your possession for at least three months since it cannot be money received as a gift.
- Should there be two units, the borrower is required to take a landlord training course.
- Each loan comes with its own income and eligibility rules.
- All applicants must attend a homeownership education course before the mortgage can be obtained.
Because each loan given out depends on the situation of the family, the NLS asks that at the initial meeting, the family bring in specific documents to help fill out the loan application completely. These include verification of income sources, copies of current mortgages and government identification.
Chicago Downpayment Plus Programs by Federal Home Loan Bank
Also known as the DPP and DPP Advantage, the Federal Home Loan Bank of Chicago’s (FHLBC) Downpayment Plus Program and Downpayment Plus Advantage programs combine down payment assistance and closing cost assistance into one package for qualified applicants that fall in the low- to moderate-income bracket. Funds are available through FHLBC member institutions. The money itself is offered in the form of a forgivable grant that is used to pay down payment and closing fees at the time of closing.
The Downpayment Plus Advantage is very similar in nature except instead of going toward applicants that pull mortgages from regular institutions, it helps non-profit organizations that provide mortgage financing to buyers. Like the other places, these non-profit organizations must also be partnered with FHLBC.
To obtain down payment assistance, there are certain requirements that have to be met:
- Before anything else, a mortgage must be applied for through a lender partnered with FHLBC.
- Applicants must be able to provide a purchase contract that has been executed.
- The annual household income must be below 80% of the area’s median average as determined by HUD.
- All income sources and potential changes must be disclosed along with verifying documents.
- At least $1,000 must be paid to the down payment total by the applicant.
- A homebuyer counseling program must be attended prior to receiving the DPP.
- All required documents must be signed and turned in, including the Certificate of Borrower Eligibility and a retention agreement to legally bind the DPP grant to the property.
- Should the home be sold or refinanced within a five year period, the grant will be due back to FHLBC in part or in full.
The required homebuyer counseling program must be one that has been created by a recognized, experienced organization in homeownership counseling. Following this, the borrower or borrowers will need to complete and submit their Certificate of Homebuyer Education.
More specifically, the class is required to take a comprehensive approach to financial literacy education and red flags pointing toward predatory lending. As for the level of counseling, this is entirely dependent on the borrower’s credit score. Should there be more than one borrower, everyone must take the same class together based on the lowest credit score presented. For those with limited mobility options, there are online options available, however this cannot be the sole source of counseling.
In addition, the DPP grant can cover counseling costs so long as these following four requirements are met.
- The counseling costs are acquired for counseling from an organization that is not a member of an institution that is able to provide DPP grants to homebuyers.
- The cost is not covered by another funding source or member company.
- The cost is no more than $700 per household.
- The cost is written out on the Closing Disclosure form.
Should a FHLBC member provide said counseling, it becomes illegal to charge a fee. Should the member charge a fee, the borrower will be reimbursed.
As stated earlier, the homebuyer must be able to pay $1,000 of their own money toward the down payment costs of their property. This can be in the form of earnest money, cash given at closing or as an item identified on the Closing Disclosure form. That being said, those that qualify for the DPP Advantage grant are not required to pay this amount. Homebuyers may receive up to $250 cash back during closing, however this is required to go straight to the $1,000 owed.
As with every DPP program, the property in question must be used as the primary residence. One or two-unit homes are eligible so long as they are within Illinois. This can be an attached property, detached property or condo. Real estate-title manufactured homes are also up for support. Should the property be under construction, said construction must be complete prior to actual closing. If rehab work is necessary, this must be done before any grant money is received.
In the case the buyer is related to the seller, the property must be independently appraised by a state licensed or certified appraiser at least six months prior to the closing date. Following this, the appraised value cannot be lower than the sales price. Related to the FHLBC means a parent, child, grandparent, grandchild, sibling, uncle, aunt or other household member.
Once the grant is obtained, they can only be used for certain things, including:
- Down payment and closing cost assistance.
- Escrow reserves given to the lender for insurance, purposes, monthly assessments or taxes. This means the funds are put into a special account that can only be accessed once certain conditions are met.
- Excrow funds for potential rehabilitation work on the property.
- Counseling costs for homeownership.
The illegal uses of these funds include:
- Escrow funds for new construction.
- More than $250 back at closing.
- Reimbursement of the $1,000 paid at closing.
- The write-down of interest rates on the mortgage.
- Using the money to pay for non-housing costs, including debts and bills.
- Paying for utilities or property taxes unrelated to the current property.
- Buying pre-paid life insurance.
- Counseling fees for homebuyers charged by a member institution.
- Finally, there are requirement the first mortgage must adhere to in order for the DPP to be awarded.
- The first mortgage must be for a period of at least five years. Should the interest rate not be fixed, the initial locked interest rate period has to be for five years.
- Mortgages that are interest-only are not eligible. This means mortgages where certain periods only bill the borrowers for interest alone.
- A mortgage cannot have a debt-to-income ratio of higher than 45%, meaning no more than 45% of the borrower’s income can go toward debts. If such a mortgage is approved, the lender must provide FHLBC a written explanation regarding this decision.
- Mortgages may come from a wide variety of programs, including conventional or FHA. However, it is up to the borrower to determine the mortgage’s rules on applying a DPP grant.
IHDA Illinois First Home
The Illinois Housing Development Authority (IHDA) offers a special down payment assistance program, which includes up to $7,500 in down payment assistance money. In order to qualify, the following requirements must be met:
- To be considered a first time home buyer you either have to be buying a home for the very first time, or not owned real estate in 3 years or more.
- You must occupy the home that you intend to purchase through this program. You may not purchase an investment property or buy for someone else.
- Contribute at least $1,000 towards your down payment or closing costs.
- Attend a homebuyer counseling course either in person or online.
- Must purchase an existing property. It is not available for new construction.
- You must have a credit score of 640 or higher to be eligible. We have other programs permitting lower credit scores, but the IHDA will only approve of applicants with a 640 mid score or higher.
- The maximum purchase price is limited to $336,706 for 1 unit, and $431,033 for 2 units.
- This program is intended for low and moderate income families, and therefore has strict income limits in place. A household can make no more than $101,520 (regardless of how many people live in the home).
You can also view the purchase limits and income limits here.
Get Matched with a Mortgage Lender
A loan representative can help you determine what mortgage programs you may qualify for, and also check your eligibility for down payment assistance. If you would like to receive a free consultation, we can help match you with a mortgage lender that offers first time home buyer loans in Illinois.