Illinois First-Time Home Buyer: 2021 Programs and Grants

What to know about buying a house in Illinois

Buying your first home can feel like a stretch no matter where you’re located.

But first-time buyers in Illinois are fortunate in many respects. For example, they can access special mortgage programs, educational courses, and counselors to guide them through the process.

Best of all, some buyers may be in line for a cash grant or loan from one of the many down payment assistance programs in the state. This could help cover your down payment and closing costs and put you in a home much sooner than you thought possible.

Verify your home buying eligibility in Illinois. Start here (Nov 3rd, 2021)

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Illinois home buyer overview

The median home sales price in Illinois was $257,000 in August 2021, according to Illinois Realtors. That represented an 8.4% increase from the prior year.

To an Illinois first-time home buyer saving for their down payment, that can sound like a scary increase. But you can take comfort in these three facts:

Illinois has many down payment assistance programs that might provide a cash grant or loan to help you bridge the gap between your savings and your home purchase costs. Read on for details
Home price inflation is much lower in Illinois than elsewhere. Nationwide, the increase over the year ending August 2021 was 14.9% compared with that 8.4% in the Prairie State
At the time of this writing, there are signs that home price inflation may be slowing nationwide

However, there are also signs that mortgage rates might increase. So you may face a narrow window within which to optimize your homeownership costs.

Illinois Home Buyer Overview
Average Home Sale Price in Illinois	$257,000
Minimum Down Payment in Illinois (3%)	$7,710
20% Down Payment in Illinois	$51,400
Average Credit Score in Illinois¹	716
Maximum Illinois Home Buyer Grant²	Up to 7% of purchase price as a grant in Aurora, Joliet and several other communities

Down payment amounts are based on the state’s most recently available average home sale price. “Minimum” down payment assumes 3% down on a conventional mortgage with a minimum credit score of 620.

If you’re eligible for a VA loan (backed by the Department of Veterans Affairs) or a USDA loan (backed by the US Department of Agriculture), you may not need any down payment at all.

Verify your home buying eligibility in Illinois. Start here (Nov 3rd, 2021)

First-time home buyer loans in Illinois

If you’re a first-time home buyer in Illinois with a 20% down payment, you can get a conventional loan with a low interest rate. And you never have to pay for private mortgage insurance (PMI).

Of course, few first-time buyers have saved enough for 20 percent down. But the good news is, you don’t need that much. Not by a long shot.

Borrowers can often get into a new home with as little as 3% or even 0% down using one of these low-down-payment mortgage programs:

Conventional 97 — From Freddie Mac or Fannie Mae. 3% down payment and 620 minimum credit score. You can usually stop paying mortgage insurance after a few years
FHA loan — Backed by the Federal Housing Administration. 3.5% down and a 580 minimum credit score. But you’re typically on the hook for mortgage insurance until you refinance to a different type of mortgage, move, or pay off your loan
VA loan — Only for veterans, active military members, reservists, and National Guard. Zero down payment is required. Minimum credit score varies by lender but often 620. No ongoing mortgage insurance after closing. These are arguably the best mortgages available, so apply if you’re eligible
USDA loan — For those on low-to-moderate incomes buying in designated rural areas. Zero down payment required. Credit score requirements vary by lender but often 640. Low mortgage insurance rates
IHDA Mortgage — May include competitive interest rates and can be used with down payment assistance and tax-efficient mortgage credit certificates. More information below

Note that most of these programs require you to buy a primary residence. That’s a home you’ll live in full-time, not a vacation home or investment property.

Depending on the mortgage loan you choose, you could potentially get into your new house with minimal cash out of pocket.

These programs even let you use gifted money or down payment assistance (DPA) to cover the down payment and closing costs.

If you’re not sure which program to choose for your first mortgage loan, your lender can help you find the right match based on your finances and home buying goals.

Find the best first-time home buyer loan for you (Nov 3rd, 2021)

Illinois first-time home buyer programs

The Illinois Housing Development Authority (IHDA) has a division (IHDA Mortgage) that provides a range of mortgage programs. Those also include down payment assistance of up to $10,000 for eligible borrowers.

Visit the IHDA Mortgage website for a series of very user-friendly guides to what’s available. And note that, in common with almost every similar program, there are some conditions:

You have to choose a participating lender from the IHDA’s list
You must complete a homebuyer education course to qualify
Your credit score must be 640 or higher

You may be able to get a Mortgage Credit Certificate (MCC) with these loans, which might save you money on your federal taxes. But speak to a tax adviser to see if one will help you.

Illinois first-time home buyer grants

IHDA Mortgage provides a range of down payment assistance programs for eligible borrowers. Cash assistance maxes out at $10,000 or 10% of the purchase price, whichever is lower. And this is a second mortgage rather than a grant.

Depending on which IHDA program you qualify for, down payment assistance might take the form of:

A forgivable second mortgage — A loan that’s forgiven over 5 or 10 years. If you stay in the home that long, you won’t have to repay a cent
A deferred second mortgage — You loan balance only comes due when you refinance, sell the home, or pay off your primary mortgage. There’s zero interest on this loan
A repayable second mortgage — The loan is paid off over 10 years, with monthly payments at 0% interest

IHDA also offers a program called SmartBuy, whichcan help first-time home buyers who want to purchase a home but have large student loan payments.

Via SmartBuy, you could qualify for $5,000 in down payment assistance as well as 15% of your purchase price (up to $40,000) toward student loans.

Like the IHDA Mortgage program, all these DPA options require a 640 credit score and a completed homeownership education course. You must also use one of the following mortgage programs for your first mortgage:

FHA, VA, or USDA loan
Conforming loan
Freddie Mac HFA Advantage loan

Of course, don’t feel that you have to go with IHDA Mortgage. Many counties, cities, and towns in Illinois offer their own programs (see below).

So, compare those — and any others you come across — with this statewide one. And choose the one that suits you best.

In particular, check to see if the community where you’re buying is one of the many where the Illinois Assist Homeownership Program operates.

Verify your home buying eligibility in Illinois. Start here (Nov 3rd, 2021)

Buying a home in Illinois’ major cities

Unsurprisingly, Chicago has the highest home prices of the state’s big-three cities. But there’s good news for an Illinois first-time home buyer who wants to purchase there. Those prices actually edged lower in the year ending August 2021.

Real estate prices did rise in both Aurora and Joliet. Still, they remain more affordable than in the Windy City.

Chicago first-time home buyers

The median list price in Chicago was $349,000 in August 2021, according to Realtor.com. That was down 3.1% year over year.

At that median price, your down payment options might fall between:

$10,470 for 3% down payment
$69,800 for 20% down payment

The City of Chicago has several programs to assist first-time buyers. However, its website provides only limited information.

Instead, it says: “We will send you a ‘Home Ownership Kit’ with information on home ownership programs if you provide your name, address and ZIP code and daytime telephone number. The information on each program lets you know what steps to take next if you wish to participate in the program.”

To request your kit, click the “Get Started Online” button on this City of Chicago webpage. You can also get more information by calling (312) 744-0281.

Aurora first-time home buyers

The median list price in Aurora was $249,900 in August 2021, according to Realtor.com. That was up 11.1% year over year.

At that median price, your down payment options might fall between:

$7,500 for 3% down payment
$49,980 for 20% down payment

The City of Aurora provides up to $3,000 in DPA for most eligible home buyers, rising to $5,000 if you’re buying in a Neighborhood Revitalization Strategy Area (NRSA). However, to qualify, your household income cannot exceed 80% of the Area Median Family Income. That was $74,550 for a four-person household in 2021.

You must also commit to living in the home and maintaining it well for at least three years. There’s more information on this application form.

The City of Aurora is among the communities listed as eligible for the Illinois Assist Homeownership Program. This appears to offer generous grants (meaning you don’t have to repay the money) to home buyers who qualify. Click that link to see if you do. And, if you do, you may have found your best option.

Joliet first-time home buyers

The median list price in Joliet was $234,900 in August 2021, according to Realtor.com. That was up 6.8% year over year.

At that median price, your down payment options might fall between:

$7,050 for 3% down payment
$46,980 for 20% down payment

The City of Joliet website has details of the Illinois Assist Homeownership Program. That pays a 3% to 7% cash grant to qualifying home buyers to fund closing costs and down payment assistance. And, because it’s a grant, you don’t have to repay it.

Click that link to see if you are eligible. If you are, you might have found your ideal program.

Where to find home buying help in Illinois

All the organizations we’ve listed above should provide advice freely to any first-time home buyer in Illinois or their local area.

In addition to our selection, the U.S. Department of Housing and Urban Development (HUD) provides a few lists for statewide, regional, and local resources.

Statewide and regional first-time home buyer resources in Illinois

Illinois home buyer resources by city/town

You can also find home buyer resources and contact information for specific cites on HUD’s Illinois first-time home buyer page.

What are today’s mortgage rates in Illinois?

You can see today’s live mortgage rates in Illinois here.

When you’re ready to start the home buying process, make sure you get personalized rate quotes from at least three mortgage lenders.

Don’t just look at advertised rates online; actually apply for preapproval and compare the interest rates and fees you’re offered. That’s the only way to know you’re getting the best deal possible on your new home loan.

Verify your new rate (Nov 3rd, 2021)

¹ Source: Experian.com 2021 study of 2020 data

²Based on a review of the state’s available DPA grants at the time this was written