2024 Illinois First-Time Homebuyer Programs and Loans
Timothy Manni started his career as a writer, but for the better part of the last 15 years he has been an editor and content team leader in the mortgage and home buying space. For six years, he lead the Mortgage Content team at NerdWallet, and before that he was the managing editor at HSH.com. Currently, he’s utilizing his years of expertise to help websites like LendingTree, Yahoo Finance and MoneyGeek elevate the information they are sharing with consumers.
The journey to homeownership can be daunting, especially for first-time homebuyers. Fortunately, the state of Illinois offers programs and assistance options specifically designed to help first-time homebuyers navigate this exciting milestone with confidence.
Whether it helps with closing costs, down payments or specialized mortgage education and solutions, these initiatives are empowering aspiring homeowners across the state.
First-time homebuyer programs in Illinois
Illinois offers a few statewide first-time homebuyer programs through the Illinois Housing Development Authority (IHDA) — their aim is to ease the financial burden of purchasing a home for first-time homebuyers by assisting with down payments, closing costs and affordable mortgage options to eligible individuals and families.
IHDAccess Forgivable Mortgage
The IHDAccess Forgivable Mortgage program features a 30-year, fixed-rate mortgage, as well as a silent second mortgage equivalent to 4% of the purchase price (up to $6,000) to cover the down payment and closing costs. Applicable to all mortgage types, this is forgiven monthly over 10 years; however, if you sell or refinance before the 10-year forgiveness period ends, the unpaid balance will become due.
Requirements
- First-time or repeat homebuyer
- Credit score: 640
- DTI: 50%
- Annual income limit: $122,280 to $136,920, based on household size and county
- Purchase price limit: $581,176 to $853,024, based on county and property type
- Contribution of 1% of the purchase price or $1,000 (whichever is greater)
- Reside in home as primary residence for at least 10 years
- Complete an online or in-person homeownership education course before closing
Pros and cons
| Pros | Cons |
|---|---|
Forgivable loan Applies to all mortgage types | Must remain in home for at least 10 years for loan to be forgiven Remaining balance must be repaid if sold or refinanced within 10-year period |
IHDAccess Deferred Mortgage
IHDAccess Deferred Mortgage offers a 30-year, fixed-rate mortgage and a loan equal to 5% of the purchase price (up to $7,500) to cover closing costs or contribute to a down payment. The additional loan is interest-free and payments are deferred for the duration of your mortgage, meaning repayment won’t be required until you pay off the mortgage, sell your home or refinance your primary mortgage.
Requirements
- First-time or repeat homebuyer
- Credit score of 640 or higher
- DTI of 50% or lower
- Annual income limit: $122,280 to $136,920, based on household size and county
- Purchase price limit: $581,176 to $853,024, based on county and property type
- Contribute 1% of the purchase price or $1,000 (whichever is greater)
- Use home as primary residence
- Completion of online or in-person homeownership education course prior to closing
Pros and cons
| Pros | Cons |
|---|---|
Interest-free Deferred payments Applies to all mortgage types | Must be repaid |
IHDAccess Repayable Mortgage
The IHDAccess Repayable Mortgage program offers 10% of purchase price (up to $10,000) alongside your 30-year, fixed-rate mortgage. As an interest-free loan for a down payment and closing costs, it’s repayable monthly over 10 years.
Requirements
- First-time or repeat homebuyer
- Minimum credit score of 640
- Maximum DTI of 50%
- Annual income limit: $122,280 to $136,920, based on household size and county
- Purchase price limit: $581,176 to $853,024, based on county and property type
- Contribution of the greater of 1% of the purchase price or $1,000
- Reside in home as primary residence
- Complete an online or in-person homeownership education course before closing
Pros and cons
| Pros | Cons |
|---|---|
Interest-free Applies to all mortgage types | Must be repaid Requires monthly payments over 10 years |
Illinois first-time homebuyer qualifications
To qualify for Illinois first-time homebuyer programs, work with an approved lender to ensure your annual income and purchase price of your soon-to-be primary residence fall within a program’s limits. You’ll need to maintain a minimum credit score of 640 and keep your DTI below 50%. You must also complete a homebuyer education course and have your $1,000 contribution ready.
Steps to apply for a first-time homebuyer program
When it’s time to move forward with purchasing your first home in Illinois, follow these steps to apply for a first-time homebuyer’s program.
- Find an IHDA-approved lender. Utilize the IHDA website to find approved lenders near you. Your chosen lender’s loan officer will assess your eligibility, gather necessary documentation and review your credit score, income and other factors to determine borrowing capacity. While IHDA loans have specific credit requirements, the average Illinois credit score as of 2023 is 720.
- Complete a HUD-approved homebuyer education course. Complete an online or in-person homebuyer education course. You can find one listed on the IHDA website.
- Review your loan estimate. Once you choose your mortgage lender and provide the loan officer with the required information and documentation, you’ll be preapproved. You’ll be provided with a loan estimate outlining which loan you qualify for and how much that loan would be for, as well as any interest and fees that would come with it.
- Find your home. Get connected with a real estate agent to assist you as you shop for a home within your budget. When you find a home you like, your real estate agent can negotiate with sellers and submit an offer when you’re ready.
- Schedule your appraisal and inspection. Following the acceptance of the offer, you arrange the appraisal and inspection.
- Underwriting. A final review of your application, documentation and home details will be completed to ensure you qualify for the loan amount and interest rate.
- Close on your mortgage. Review and sign the required loan documentation to finalize the home purchase process, make any payments and receive the keys to your new home.
Understanding Illinois first-time homebuyer down payment assistance
Seeking assistance with down payments in Illinois can make homeownership more attainable by reducing the upfront financial burden. Grants, loans or tax credits may be available, easing the cost of purchasing a home.
Deferred second mortgage
A deferred second mortgage provides down payment assistance in the form of a loan. Considered to be a second mortgage, this loan usually doesn’t require repayment until the homeowner pays off the first mortgage, sells or refinances the property.
Forgivable second mortgage
A forgivable second mortgage offers down payment assistance in the form of loan. Homebuyers don’t make loan payments or pay interest as long as they remain in the home for the agreed-upon duration, typically between five to 10 years.
Grant
Grants provide homebuyers with cash to cover a portion of the mortgage and down payment. Unlike second mortgages, grants do not require repayment.
Mortgage credit certificate
A mortgage credit certificate (MCC) allows first-time homebuyers to claim up to $2,000 in a federal income tax credit each year. The total credit is based on a percentage of the mortgage payment, providing direct financial assistance.
Keep these things in mind about DPA programs
Be mindful of the program requirements and expectations when considering down payment assistance. Income limits often apply, and certain programs may require repayment if you move, pay off or refinance the first mortgage or sell the property before a specified period lapses. Understanding these requirements is necessary to making informed decisions and ensuring you become a homeowner.
How much of a down payment do I need to buy a house in Illinois?
In Illinois, the down payment required for a house varies, though LendingTree’s latest first-time homebuyer study found the average down payment is $32,645. But while aiming for a 20% down payment will remove the need for private mortgage insurance, some programs may only require 3%. Ideally, buyers should consider program requirements and home prices when deciding on a down payment that aligns with their budget.
Can I qualify for down payment assistance in Illinois?
In Illinois, to qualify for down payment assistance, you’ll need to secure a first mortgage through IHDA, have a credit score of 640 or higher, maintain a debt-to-income ratio of 50% or less, meet county income and purchase price limits and complete a homebuyer education course.
How do I apply for Illinois first-time homebuyer down payment assistance?
By visiting the IHDA website, you can connect with an approved lender who can walk you through the IHDA mortgage process and which down payment assistance programs work best for your financial situation.
Here’s what you need to know about the process of applying for a home loan.Other first-time homebuyer loan programs
Conventional loans
Conventional home loans are mortgages that aren’t guaranteed by the government, like FHA or VA loans. Despite demanding higher credit scores than FHA loans and larger down payments than VA and USDA loans, they only require 3% down for first-time buyers, and provide competitive interest rates and flexible terms for eligible borrowers.
FHA loans
FHA loans are government-backed mortgages designed to make homeownership more accessible to homebuyers of varying financial profiles. And while mortgage rates for FHA loans have recently fallen close to conventional loan rates, these loans offer more lenient credit qualification requirements, making them a popular choice for first-time homebuyers and those with less-than-perfect credit.
VA loans
VA loans are home loans offered exclusively to military service members, veterans and eligible spouses, which are backed by the U.S. Department of Veterans Affairs (VA). With notably favorable terms — like affordable interest rates and no down payment requirement — these loans aim to support veterans in achieving homeownership.
USDA loans
Administered by the U.S. Department of Agriculture, USDA loans are designed for individuals in rural communities with limited incomes. With similar features to VA loans (like competitive interest rates and no down payment requirements), these loans provide an accessible pathway to homeownership for eligible homebuyers.
What are the best first-time homebuyer loans?
Homebuyers have the freedom to choose between different first-time homebuyer loans. When considering conventional, FHA, VA and USDA loans, evaluate your credit, income and other eligibility criteria to help you determine the best loan type. To help with your decision, seek guidance from lenders familiar with these loans who can help you choose an option that aligns with your financial situation and qualifications.
| Loan program | Best for first-time homebuyers who: |
|---|---|
| Conventional | Have higher credit scores and minimal debts. |
| FHA | Have less-than-perfect credit seek competitive interest rates and a low down payment. |
| VA | Are military service members, veterans or eligible spouses seeking no down payment and affordable interest rates. |
| USDA | Are purchasing a home in rural areas and want to avoid paying a down payment. |
Home price trends in Illinois major areas
Across the United States, between the fourth quarter 2022 and the fourth quarter of 2023, home prices rose by 6.5 percent, according to the Federal Housing Finance Agency (FHFA) House Price Index.
Home prices in Illinois saw higher than average increases, specifically in the Elgin metro area, which increased by 10% year over year and 1.5% from the previous quarter. Additionally, in the Chicago-Naperville-Evanston metro area, home prices increased by 8.3 percent year over year, with a 1.5% increase from the previous quarter. Lake County-Kenosha County metro followed with the third largest increase in Illinois of 8% year over year and 1.3% from the previous quarter.
Is there a first-time homebuyer tax credit in Illinois?
Unfortunately, both the federal first-time home buyer tax credit and the Illinois mortgage credit certificate are currently out of commission. That said, homeowners who itemize at tax time can take advantage of the standard mortgage interest tax deduction.
What are the current mortgage rate trends in Illinois?
Since the start of 2024, interest rates in Illinois for both fixed and adjustable rates have moved higher. Rates on 5/1 ARMs have been the most consistent over the year so far, while both 15-year and 30-year fixed loans have seen their rates moved at least a third of a percentage point higher since early January.
Check out Illinois interest rates in your town or city on the LendingTree mortgage rates page.
Current 30-year fixed mortgage rates are averaging: 7.13% 7.39%
Current 15-year fixed mortgage rates are averaging: 6.65% 6.83%