Homebuyer Assistance

Dan Gjeldum
Senior VP of Mortgage Lending, Guaranteed Rate
Dan Gjeldum has 20 years of experience in lending, specializing in mortgage origination and sales management. In 2010, he was ranked No. 122 out of more than 10,000 Residential Mortgage Originators in America by Scotsman Guide.

What homebuyer assistance programs are available to homebuyers? Are there any new programs or changes on the horizon?

State Programs
In Illinois, the Housing Development Authority (IHDA) has two down payment assistance programs to make homeownership more obtainable:

• 1st Home Illinois is for first-time homebuyers or eligible veterans. This program offers $7,500 in down payment assistance that is forgivable over five years, and is only available in designated counties (Boone, Cook, DeKalb, Fulton, Kane, Marion, McHenry, St. Clair, Will and Winnebago).
• The @HomeIllinois program provides $5,000 in down payment assistance and has zero percent interest, with monthly principle-only payments over 10 years. This program is available to repeat homebuyers.

Both require the borrower to meet income and purchase price restrictions that are based on location and number of household members. Both programs require the borrower to pay back the down payment assistance if they refinance or sell the home within the five- or 10-year term. They are also subject to recapture tax if they sell the home, make a profit or their income increases exponentially since they purchased the home (this is a self-reporting tax that IHDA will pay if a borrower gets penalized).

The IHDA and the city of Chicago also offer Mortgage Credit Certificates (MCC). MCCs provide a federal income tax credit to borrowers when they file their taxes. To qualify, buyers must be below the maximum income and purchase price limits, meet specific credit requirements and complete homeownership counseling.

Federal Programs
Within the last year, existing programs made changes to open the doors to more first-time homebuyers. Low down payment options and expanded credit guidelines will help more consumers realize the dream of homeownership. These federal programs are available for residents in Illinois.

• The Federal Housing Authority (FHA) government loan program is a great option for borrowers with a smaller down payment or lower credit score. The 3.5 percent down payment requirement and expanded FICO score allowance creates opportunity for more borrowers to get into a home. As big banks are starting to step away from FHA loans, Guaranteed Rate continues to focus on this flexible program and has funded nearly $350M in FHA loan volume for Illinois in 2015.
• There are also conventional options that have low down payment options. Both Fannie Mae and Freddie Mac offer 3 percent down payment options on conventional loans. Some of these products require the borrower to be a first-time homebuyer or meet income restrictions unless the home is located in a targeted area. Fannie’s new HomeReady mortgage product has created extensive excitement in the real estate industry because of the expanded guidelines and elimination of the first-time homebuyer requirement.

As mortgages evolve, homeownership will be within reach for more people thanks to the variety of loan programs available.