Being a homeowner brings numerous benefits for individuals and families and stabilizes communities. As the National Association of Realtors (NAR) points out, homeownership can lead to community pride and dedication; families who own their own homes spend more time with their children, improving their long-term outcomes, and owning a home is an essential way for individuals and families to build wealth, creating a more secure financial future. In fact, according to the NAR, “On a national level, homebuyers who purchased a home 10 years ago have gained an average of $225,000 in equity [in] their home.”
But the cost of a down payment—usually 20%—can be an insurmountable hurdle for many people trying to purchase a home, putting homeownership out of reach for many community members. That’s why it’s common for towns and states to offer down payment assistance programs, including many available to our local residents here in Central Illinois. In this post, we’ll explore some of these regional and national programs available to help make homeownership affordable, strengthening communities by increasing the number of Illinois homeowners.
Down Payment Programs Pave the Way to Homeownership
As we mentioned above, one of the biggest barriers to homeownership is the down payment required to secure a loan. By providing financial assistance, down payment programs make homeownership more accessible and attainable for individuals and families who may not be able to save a large down payment on their own.
Down payment programs can also help reduce the financial strain associated with purchasing a home, as they allow buyers to secure more favorable loan terms and potentially avoid the requirement for private mortgage insurance (PMI)—an additional monthly fee. Additionally, using a down payment program can free up additional funds that can be directed towards other essential expenses, such as home improvements or furnishing the new property.
Beyond providing access to loans and funding to help offset the costs of early homeownership, down payment programs often come with educational resources and counseling services, offering guidance and support throughout the homebuying process. These tools can ultimately empower buyers to make informed decisions and achieve long-term financial stability.
Finding Your Dream Home: Exploring Down Payment Assistance Available to Illinois Residents
Illinois offers a range of down payment programs to assist individuals and families in their journey toward homeownership. Some notable programs available include:
Illinois Housing Development Authority Programs
The Illinois Housing Development Authority (IHDA) offers several programs, including the 1stHomeIllinois Program, SmartMove Program, and Access Forgivable Program. IHDA programs can provide down payment assistance, forgivable loans for down payments (loans that may not need to be paid back), and affordable mortgage options to qualified buyers.
These programs are usually not restricted to first time homebuyers, but they do have both limits on income and home purchase prices. Because the programs target certain regions in Illinois, limits on home purchase prices can vary depending on where a specific property is located.
Federal Programs
While not providing down payment funds, federal programs can provide access to home loans to individuals who may not otherwise qualify due to down payment costs or income and credit requirements. These programs include:
Federal Housing Administration (FHA) Loans: Offered through your bank and backed by the federal government, these loans offer down payments as low as 3.5%, as well as more flexible credit and income requirements.
Department of Veterans Affairs (VA) Loans: For military members (active or retired) and their spouses, these loans offer competitive interest rates paired with no down payment requirement. Also available through your bank. Must meet income eligibility requirements.
United States Department of Agriculture (USDA) Loans: The USDA offers both direct loans (apply to the USDA for very low-income borrowers) and guaranteed loans (apply at your bank for low to middle-income borrowers). These loans require no down payment and flexible qualification criteria. However, loans are only available for homes in designated rural or low-population areas. You can use the Property Eligibility Lookup Tool to see if properties in your area qualify.
Other Local and Community-Based Programs
Many local governments and municipalities in Illinois offer down payment assistance programs tailored to their communities. These programs vary in availability and eligibility requirements, but they often provide financial assistance, grants, or forgivable loans to help buyers with their down payment needs.
Nearby towns with assistance programs include:
Normal, Illinois: Normal’s Down Payment Assistance Program is a 0% interest, five-year forgivable loan. Funded through the US Department of Housing and Urban Development’s (HUD) Community Development Block Grant (CDBG) program, this program is available for those buying homes in the Town of Normal and have a household income at or below 80% of the area median income.
Peoria, Illinois: Peoria’s Down Payment Assistance Program provides grants of up to $5,000 for homes at or below $125,000 located in their qualified census tract.
Expert Guidance from Mortgage Lenders
Because the details and availability of programs can change often, consulting with a knowledgeable local mortgage lender can help ensure that you are taking advantage of all the assistance opportunities available to you. Lenders can also connect you with local housing counseling agencies and help you navigate the intricacies and qualification requirements of local, statewide, and national down payment programs. And a reliable mortgage lender will provide guidance and support throughout the homebuying process, from establishing your budget to closing on your loan.
Quality lenders can help you:
- Determine how much money you’ll need to purchase a home in Illinois that meets your needs.
- Compare available homebuyer programs, from downpayment assistance to specialized loan programs.
- Offer competitive loan terms, interest rates, and fees, and work with you to secure the most favorable financing for your home purchase.
When finding a lender to work with, look for lenders who actively participate in down payment assistance programs and affordable mortgage products, and have a track record of successfully guiding borrowers through the process. You can schedule consultations with potential lenders to discuss your specific needs, ask questions about their experience with these programs, and assess their responsiveness and willingness to help.
How to Ensure a Smooth Down Payment and Mortgage Application Process
While an experienced and dedicated lender will work with you throughout your loan process, there are steps you can take as a homebuyer to ensure a smooth down payment and mortgage application process.
- First, gather documentation of your income and liabilities. This includes proof of income like tax returns and pay stubs, employment history, bank and other financial account statements, a recent copy of your credit report, and details about all your liabilities, including credit card and loan statements. Your lender can review this- and help you make determinations for how best to proceed with your home purchase.
- Consult with a reputable lender to understand the specific requirements and eligibility criteria for available down payment and loan programs.
- When you’re ready to apply for your loan and/or down payment assistance, be sure to complete the application accurately and provide all requested documentation promptly to avoid delays.
- Maintain open communication with your lender throughout the process, promptly responding to any inquiries or requests for additional information.
- Be prepared to attend any required counseling sessions or educational programs associated with the down payment assistance program.
- Working with your lender, review all terms and conditions of the assistance program and the mortgage loan before signing any agreements.
Your Journey to Homeownership in Illinois
Navigating the world of down payment assistance programs in Illinois can be overwhelming, but finding the funds to help you achieve your goal of homeownership can be an empowering process. Individuals and families can overcome the financial barriers that often hinder homeownership by exploring the various options available, such as the Illinois Housing Development Authority programs, federal programs, and local community-based programs.
Working with a trusted mortgage lender experienced in down payment assistance programs is crucial, as they can provide invaluable guidance, support, and expertise throughout the application process. Reach out to one of our mortgage lenders today to learn more about our local home buying assistance programs and the affordable mortgage options we offer here at Flanagan State Bank.
