Schaumburg, IL – First Time Home Buyer Programs
Are you a first time home buyer looking to purchase a home in Schaumburg, 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 Schaumburg, IL.
Schaumburg, IL – First Time Home Buyer Loans
Below are some of the potential mortgage options that may be available to you.
Types of Mortgages:
- Conventional Loans – Conventional loans offer the best loan terms to borrowers with good or excellent credit (620 or higher credit score), 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 limits calculator. 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 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 should 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.
Would You Like to Get Pre-Approved for a Mortgage?
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Upon receiving your request, we will match you with a mortgage lender that offers first time home buyer loans in Illinois. You will be provided with a free consultation, and the opportunity to get pre-approved for a mortgage.
Schaumburg, IL – Down Payment Assistance Programs
First time home buyers in Schaumburg may be eligible to receive down payment assistance. This includes programs that are offered statewide, as well as a program offered exclusively in Schaumburg. You can learn more about the program offered in Schaumburg below.
Village of Schaumburg First Time Homebuyer’s Program
The Village of Schaumburg is able to provide its residents with financial support with aid from the Community Development Block Grant (CDBG). These funds originate with the US Department of Housing and Urban Development (HUD) and are allocated on a yearly basis. Because of this, funding faces regular depletion, often running dry until the next round of funding every May. That being said, the loan itself is forgivable, meaning that if all conditions are met, all or part of the loan doesn’t have to be paid back. With an awarded amount of up to $10,000 to cover closing costs, down payments costs and other fees, it’s a very popular choice for the low- to medium-income residents of Schaumburg.
The loan itself is based on the Village of Schaumburg paying both a reasonable chunk of closing cost fees in addition to up to 50% of down payment costs, meaning not everyone receives a full $10,000. Eligible applicants are expected to be able to pay at least $1,000 toward the down payment with their own money that is not obtained through gifts. Once a property is settled on, the maximum down payment amount can be no more than 20% of the price it was purchased at. As for forgiveness, it is done so at a rate of 1/60th per month for a period of five years. So long as the home is neither refinanced nor sold, the loan will not be due back.
How to Qualify for this DPA Program:
Before even applying for assistance, there are stipulations that have to be met:
- Applicants cannot have owned a house in three years, meaning their names cannot have appeared on a mortgage in the last 36 months.
- All assets of the household cannot total more than $60,000.
- Before being awarded assistance, homebuyers have to have already qualified for a first mortgage.
- The property’s location must be within the legal limits of the Village of Schaumburg.
- If the home was built before 1978, it must undergo a home and lead-based paint inspection.
- The property must have a title that is clear and free, meaning there should be nothing that would call into question the ownership of the property.
- Eligible applicants are required to attend housing counseling.
Apart from these, there is the discussion of income qualifications. Because this money is given to help lower income families afford a home, it makes sense that there would then be restrictions on how much a home can bring in annually. Like most loans, this amount includes the net income from every single member of the household that is 18 years or older. Currently, the income limits are as follows:
- 1 Person – $42,600
- 2 People – $48,650
- 3 People – $54,750
- 4 People – $60,800
- 5 People – $65,700
- 6 People – $70,550
- 7 People – $75,400
They are based off of HUD’s income eligibility for the area where the total income is less than 80% of the area’s median. These numbers are subject to change.
The Process and How to Get Started:
To start, an application must be obtained, however they’re not as freely available as downloading a packet. Instead, they must be gotten either in person or by mail following providing proof that you meet the preliminary qualifications. After filling out all of the necessary paperwork, the application is returned and processed by the Village of Schaumburg. Once applicants are notified of their success, the property can be closed.
While this process may seem confusing, we are here to help you. We can work with you to prepare your application, and to get pre-approved for a first time home buyer mortgage loan.
Federal Home Loan Bank of Chicago Downpayment Plus Programs
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.
Are You Eligible for Down Payment Assistance?
A mortgage specialist can help you check your eligibility for down payment assistance. If you would like to receive some help checking what down payment assistance programs you may be eligible for, fill out this form. We will match you with a mortgage lender that can help you see if you qualify for any down payment assistance.
First Time Home Buyer Questions
Below are some of the most frequently asked questions about first time home buyer loans:
How much do I need for a down payment?
The minimum down payment requirement will depend on the type of mortgage program. USDA and VA loans do not require any down payment. FHA loans only require a 3.5% down payment (and allow down payment assistance to be used). Conventional loans typically require either 3% or 5% down. The minimum down payment for a non-prime loan is usually at least 10% (or higher).
What is the maximum loan amount that I can qualify for?
The amount that you will be allowed to borrow will depend mostly on your income, as well as the particular type of loan you are interested in. There are maximum loan limits for each type of mortgage program which are set at the county level. Conforming loan limits are the maximum loan amounts allowed for conventional mortgages. FHA loans have their own loan limits. This is not necessarily how much you can borrow though, but the maximum amount allowed in your location. The amount that you can personal qualify for will be based upon your income, and how much debt you have. For most loans, your monthly mortgage payment, along with your monthly debts may not exceed 43% of your income.
Can I buy a home without a real estate agent?
It depends on your state and the type of loan program. For some states, you must use an agent. In other states, you are not required to use a real estate agent for many loan program, such as conventional mortgages. However, some loan types require that you use a real estate agent regardless of your location, such as USDA loans.
Are there mortgage loan options for borrowers with bad credit?
Yes, both FHA loans and non-prime loans are available to borrowers with lower credit score, and other credit challenges. The minimum credit score required for an FHA loan is 500. For non-prime loans, there are lenders that allow a borrower to have a credit score even below 500. Non-prime loans also do not have any waiting periods after a bankruptcy.
Can I buy a home if I owe tax debt?
For government-backed loans, such as FHA, VA, and USDA loans, you can buy a home with tax debt as long as you have made a payment plan with the IRS, and are not behind on the payments. Any federal debt must be in good standing in order to get a government-based mortgage. If your tax debts have moved into the status of a tax lien, this will prevent you from getting a home loan until it is resolved.
Can I buy a home if I have student loans?
As long as you are not delinquent on the student loan payments, and the monthly payments do not cause excessive debt-to-income ratios, you can still get a mortgage.
Can I buy a home without my spouse?
A common question is if you can buy a house without your wife or husband. The short answer is yes. There are numerous reasons someone may want to exclude their spouse from a mortgage application, such as lower credit, lack of job history or income, or one spouse having excessive debt that could prevent an approval. You may be able to qualify and get a home loan without your spouse.
How can I find out if I qualify for a mortgage?
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.