Sources of Homebuyer Assistance
Before we get into sources of home buyer assistance, let’s be clear that there are upfront costs that you will have to pay out of pocket.
Your first expense will be an “Earnest Money” deposit. Once you find the home that you want, you will have to put down $500.00-$1,500.00 normally to take the home off the market
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It is also strongly suggested that you obtain a Property Inspection to determine the condition of the home. Some lenders may also require that you pay for an Appraisal up front (some lenders will include the appraisal fee in the closing costs).
The appraisal determines the value of the property. Lenders want to make sure that the property is worth more than the loan. The cost of a residential appraisal is usually in the range of $350.00-$700.00 depending on the square footage and type of property.
Also, most lenders want to see that you have reserves (usually at least 2 months of housing payments in a savings/accessible retirement account). Reserves could also be provided in the form of a “gift”.
Lenders want you to have “skin in the game”.
So having said that, there are several sources for obtaining assistance with purchasing your new home.
The Seller/Property Owner
As an incentive to purchase their property, sellers may offer to provide a credit to offset or reduce the buyer’s down payment/closing costs. Usually there is a cap/maximum percentage that a lender will allow a seller to assist with. For instance, if the maximum allowable credit is 6%, for a $100,000.00 loan, the seller could contribute up to $6,000.00 of the sale proceeds to help the buyer pay for their closing costs.
The Lender
Some Lenders will have programs to assist Home Buyers with the down payment and/or closing costs. This may be in the form of a Lender Credit, Grant or Junior Lien – a second mortgage on the property.
When interviewing lenders, inquire about the availability of programs that they have or that they participate in. Also inquire as to whether the funds will be immediately forgiven of if the assistance is considered a loan. NOTE: Not all lenders participate in every available program. Some lenders do not have any programs, and they may not refer you to another lender that does. It will be up to you to ask questions and interview several lenders to find out programs that you may qualify for. Refer to our Article “ Questions to Ask a Lender”.
The City
Some Cities like Chicago offer Home Buyer Assistance programs such as the Community Connections Home Buyer Assistance Program that provides funds to eligible Career Service employeesand three groups of first responders: Chicago police officers, firefighters, and paramedics. Forgivable loans of $30,000.00 are available to allow select City workers to purchase homes in targeted Chicago neighborhoods to enhance revitalization efforts.
A listing of eligible city jobs, the targeted map area and instructions for applying is available on the site:
The State
Illinois Housing Development Authority (IHDA)receives funds from the Federal Government to offer down payment assistance to first-time or repeat buyers who intend to occupy a property for at least 5 years. These funds are provided to homeowners in the form of either a Forgivable or Repayable loan. The loans are provided through participating lenders. Again, not every lender participates in the IHDA loan program – and if they do, they may not offer all of the IHDA Access products.
The IHDA loan amounts range from $6,00.00 to $10,000.00.
The website link to read about the various IHDA loans and to find a lender who participates in the program is below.
The County
The Cook County Home Buyer Assistance Program provides assistance for individuals looking to purchase a property in cities other than Chicago. In other words, if you are looking to purchase a property in Chicago, this program is not available.
Also, it appears that only Wintrust Bank is offering this program. See below for details:
It is possible to receive/qualify for more than one home buyer assistance program. A knowledgeable Loan Officer will know which programs can be layered.
Another important point, many home buyer assistance programs have a home buyer education requirement. Contact a HUD-Certified Housing Counseling Agency in your area and attend a workshop and engage the assistance of a HUD-Certified Housing Counselor. The guidance they provide is invaluable – even though their services are usually free to you.
