First-time Home Buyer Guide for Illinois

Felicia Oliver

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Felicia Oliver

April 14th, 2022
Updated April 14th, 2022

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Home buyer requirements | Programs in Illinois | Low-income assistance | Disabled assistance | The home-buying process | FAQs

Illinois offers lots of programs with significant financial benefits for first-time home buyers, including:

» JUMP: What are first-time home buyer programs in Illinois?

The state offers programs through the Illinois Housing Development Authority (IHDA). Some larger cities, like Chicago and Aurora, and counties like Cook (home of Chicago), Lake, and Kane have programs to assist first-time home buyers in their respective areas as well.

🏠 The state of the housing market in Illinois

Buying a home in Illinois right now is a good investment.

🌡 It's a neutral market: There aren't a ton of homes available, but buyers have time to weigh their options. Buyers are less likely to face bidding wars.

📈 High appreciation rate: Property values are increasing. During 2022, home values in Illinois will grow by 7.5%.

📈 Mortgage rates are rising: In Illinois, mortgage rates average 4.64% for a 15-year mortgage and 5.54% for a 30-year mortgage.

» READ: 8 Steps to Buying a House in Illinois

What are first-time home buyer requirements in Illinois?

First-time home buyer definition | Income levels | Credit score | Debt-to-income (DTI) ratio Residency

First-time home buyer definition

A first-time home buyer in Illinois is someone who has never purchased a home as their principal residence.

According to the U.S. Department of Housing and Urban Development (HUD) first-time home buyers also include:

  • Anyone who hasn't owned a principal residence in three years
  • An individual who has never owned a principal residence, even if their spouse was a homeowner.
  • A single parent who owned a home with their ex-spouse.
  • A displaced homemaker who only owned property with their spouse.

The Illinois Housing Development Authority’s (IHDA) home buyer programs are available to both first-time and repeat home buyers. Anyone can apply as long as the property they're purchasing is in Illinois.

First-time home buyers in Illinois can also qualify for federal programs available from HUD, the Federal Housing Administration (FHA), the Veterans Administration (VA), and the U.S. Department of Agriculture (USDA). Some conventional loan programs offered through Fannie Mae and Freddie Mac also have features that appeal to first-time home buyers in Illinois.

What shape do my finances need to be in?

Most first-time home buyer assistance programs have some minimum financial qualifications that buyers need to meet.

You’ll need enough income to afford your monthly mortgage payments, regardless of which program you use. And you’ll likely need to have some money saved to make a down payment on the home (several programs require a minimum of at least $1,000), and later to address home maintenance issues.

Income maximums for Illinois programs

Under the IHDA program, buyers in the largest counties in Illinois — Cook, Dupage, Lake, Kane, McHenry, and Will — can have a maximum income of $111,840 in non-targeted areas.

Income to qualify for IHDA programs vary depending on whether the area where the home purchase takes place is a “targeted” or “non-targeted” property area. The federal government has designated certain areas as “targeted areas'' to attract homeowners.

Income to qualify for IHDA programs also depends on the county you want to buy a home in and whether or not the home qualifies for a Mortgage Tax Credit Certificate (MCC).

Although it’s not a financial qualification, some programs have maximum home purchase price thresholds as well. The maximum is no more than $332,235 for non-targeted areas in Illinois largest counties.

See table of all counties, with targeted and non-targeted areas outlined, in this income and purchase price table.

How much money you need to buy an average home in Illinois

The average home value in Illinois is $217,672. For a conventional loan, you'll need a down payment of at least 20%, which would mean you need a down payment of $43,534. For a loan that allows a 3% down payment, you would need $6,530.

Home buyers also typically have to pay 3–6% of a home's price in closing costs. Unless you qualify for a loan or grant to cover closing, you would be on the hook for $6,530–$13,060 out of pocket. Once you buy your home, your monthly mortgage payment will vary based on your loan amount and the interest rate.

For a $217,672 home bought at 3% down, expect to pay a little less than $1,500. That payment would go toward the remaining down payment, an interest rate of 4.14% (average rate as of today Feb. 9, 2022), plus PMI and property taxes.

Lastly, homeowners in Illinois spend an average of $2,265 in maintenance costs annually, but this can vary widely based on the house. In general, you should set aside 1% of the house's value each year for repairs.

What credit score does a first-time home buyer need?

Financial qualifications for IHDA programs

You’ll need a minimum credit scoreof 640.

Financial qualification for federal programs

The minimum credit score required for federal government programs from HUD, the FHA, USDA, and VA is 580. If your credit score is below 580, learn how you can fix your credit score in six months.

🤓 Credit scores: The higher, the better
A higher credit score could yield lower mortgage interest rates, which could mean lower monthly payments — and a lot of money saved over the course of your loan.

What debt-to-income (DTI) ratio does a first-time home buyer need?

For all IHDA loan types, the maximum total debt-to-income ratio is 45%.

FHA loans can allow DTIs as high as 57% under certain conditions. Conventional loans, which are not backed by the government, typically require a DTI below 36%.

How to determine your DTI

To calculate your DTI, add all of your recurring monthly debt payments, plus your estimated mortgage payment, and divide it by your gross monthly income (before taxes).

Residency requirements

The IHDA's programs are specifically for Illinois residents looking to purchase a home in the state.

Requirements for individual Illinois counties and municipalities should be checked with those local programs.

Federal programs offered by HUD, the USDA, and the VA are for all home buyers, regardless of where they live or decide to purchase.

What are first-time government home buyer programs in Illinois?

Illinois offers first-time home buyers loans, grants, lower interest rate mortgages, and educational workshops to assist in making their purchase though the Illinois Housing Development Authority (IHDA).

When you add in programs sponsored by various local and county governments in Illinois, and federal government programs and national programs that service Illinois and beyond, you are likely to find a program that can make your dreams of owning your first home in Illinois a reality.

With so many different home buyer programs out there, it might be hard to choose which one is best for you. An experienced real estate agent can help you sort through your options. For a quick comparison, refer to the table below.

First-time home buyer program comparisons


Loan provider
Down payment/closing cost amount
Debt-to-income ratio (DTI)
Credit score
Best for…
IHDA loans
$1,000+
Maximum total DTI of 45% for all IHDA loan types
640+
Home buyers with average credit history who need down payment and closing cost assistance but can otherwise qualify for a mortgage
National Housing Services of Chicago (NHS)
Down payments as low as 3%. Qualified borrowers may receive up to $15,000 in down payment assistance.
Depends on the lender NHS connects you with.
A minimum credit score is not required
First-time home buyers and families in need of affordable housing who want to buy in Chicago or southern Cook County
Community Partners for Affordable Housing (CPAH) (Lake County)
Down payments of $1,000 or 1% of the purchase price, whichever is greater.
DTI must not exceed 43%.
Specific credit score requirements aren't outlined, but home buyers must qualify for financing with a CPAH participating pender.
Home buyers looking for assistance to buy an affordable home, or possibly buy and rehab a new home in Lake County
Kane CountyFirst-Time Homebuyer Deferred Loan Program
Provides up to $10,000 in down payment and/or closing-cost assistance. Must contribute at least 1% of the purchase price of the home.
Back-end DTI must not exceed 50% of the total household monthly income, as identified by the first mortgage lender.
580+
Eligible home buyers who currently live (or work full-time) in the Kane-Elgin Consortium Area, and must have done so for at least one year leading up to application for the program. Home buyers must also not exceed federal income limits
Choose Aurora Homebuyer Assistance Forgivable Loan Program
Up to $3,000 or $5,000, depending on the location of the home.
DTI within program guidelines (front end 25–35%; back end < 43%)
Not specified, but as a HUD-aligned program, likely 580+
Anyone purchasing an existing home located in the city limits of Aurora
Conventional fixed-rate loans
20%or
<20% + PMI
Mortgage lenders generally require a DTI below 36% for conventional loans, though in some cases a lender may accept a higher percentage.
620+
Home buyers with an average credit history who want the same interest rate for the entire duration of the loan
Fannie Mae Conventional 97% LTV
3% down payment loan option, no upfront mortgage insurance fees, and your PMI can be canceled once you achieve 20% equity

Fannie Mae’s 3% down payment loan has no upfront mortgage insurance fees and your PMI can be canceled once you achieve 20% equity n your home. The loan amount caps at $647,200.
620+
Home buyers with limited access to cash for a down payment.
3%+ down payment option. PMI can be canceled once you achieve 20% equity.
Maximum is 35%-45% depending on credit score. See details in the Fannie Mae Eligibility Matrix.
620+
Low-income, first-time, or repeat home buyers with limited cash for down payment
3% down payment option. PMI can be canceled once you achieve 20% equity
Maximum is 45%
660+
Very low- to low-income borrowers
Federal Housing Administration (FHA)
3.5%+10%+
43–57%
580+<580
Borrowers with poor credit history, including first-time buyers and seniors. Lenders may require PMI
U.S. Department of Agriculture (USDA)
$0
41%
620+
Low- or moderate-income buyers in less populated or rural regions
Veterans Administration (VA)
$0
No more than 41%. However, the maximum DTI ratio for a VA loan may be higher if you have good credit, high residual income, or make a large down payment.
N/A (620+ recommended)
Veterans and active duty service members

If you're looking to buy in an area outside of the larger counties and cities in Illinois, check with those local governments or see HUD’s list of alternative home buyer assistance programs in Illinois.

What are first-time down payment and home closing cost assistance programs in Illinois?

The Illinois Housing Development Authority’s (IHDA) offers three specific programs that provide down payment and closing cost assistance for first-time home buyers: IHDAccess Forgivable Loan, IHDAccess Deferred Loan, and IHDAccess Repayable Loan.

IHDA’s programs are available for all mortgage types, including FHA, VA, and USDA loans. These programs are available to first-time and repeat home buyers statewide.

HUD counseling programs offer closing cost grants after completion of some of their home buyer education programs. In Chicago, the National Housing Services of Chicago (NHS), a HUD-approved housing counseling agency, offers workshops that provide certificates for down payment assistance/closing cost grants. The cost varies from free to $150.

Chicago and some other municipalities offer assistance programs as well.

Down payment and closing cost assistance comparison

Program
Assistance for down payment and closing costs
Repayment
IHDAccess Forgivable Loan
4% of home purchase price, up to $6,000
No monthly repayment unless home is sold or refinanced within 10 years
IHDAccess Deferred Loan
5% of home purchase price, up to $7,500
Full amount due ONLY if you sell or refinance your home, or if you pay off mortgage
IHDAccess Repayable Loan
10% of home purchase price, up to $10,000; offered as interest-free loan
Monthly, over 10 years; zero interest
Neighborhood Housing Services of Chicago
3% of home purchase price, up to $15,000.
Terms vary by the assistance or grant program
Lake County Community Partners for Affordable Housing (CPAH)
5% of home purchase price
No monthly payments, zero interest; fully forgiven after 5 years and 60 days
Kane County First-Time Homebuyer Loan Program
Up to $10,000
Full amount due ONLY if you sell your home, transfer your title, or no longer live in your home; zero interest
Choose Aurora Homebuyer Assistance Forgivable Loan Program
Up to $3,000–$5,000 for eligible homes in the Neighborhood Revitalization Strategy Area.
No repayment after 3 years

What are first-time mortgage assistance programs in Illinois?

The Illinois Housing Development Authority (IHDA) has loans for first-time buyers in Illinois. Some conventional mortgages and government loan programs offered by localities and counties in Illinois can offer loans with favorable terms to first-time home buyers as well.

Illinois government programs (IHDA)

The three IHDA home buyer loan programs — IHDAccess Forgiven, IHDAccess Deferred, and IHDAccess Repayable — all offer 30-year, fixed-rate mortgages with market or below interest rates. They require a minimum of $1,000 to contribute to down payment (or 1% of the purchase price, whichever is greater).

What happened to the other IHDA programs?

The IHDA Smart Buy Mortgage Program closed as of May 21, 2021. This program was created to help low- and moderate-income home buyers who are paying off student loans.

The IHDA Mortgage Opening Doors Program was suspended for new reservations as of Jan. 31, 2022.

City- and county-level programs

Chicago

The City of Chicago and Neighborhood Housing Services, through its partner Neighborhood Lending Services (NLS), provides first- and second-mortgage loans for the purchase — or purchase and rehab — of one- to four-unit buildings.

The NLS program targets potential home buyers who might otherwise not be able to purchase a home in Chicago or south suburban Cook County. Down payments as low as 3% are okay, and qualifying isn't based solely on your credit score.

If you’re interested in purchasing a property to renovate, an NLS-assigned construction specialist can guide you through the rehab process. The program allows you to buy a home and roll the mortgage and cost of repairs into one loan.

Lake County

Lake County’s Community Partners for Affordable Housing (CPAH) program serves people looking to purchase a home in Lake County, Illinois’ third-largest county.

Home buyers must:

  • Qualify for financing with a CPAH-participating lender
  • Earn no more than 80% of area median income (AMI), adjusted for household size — for a two-adult household, the maximum income is $59,650.

The eligible property must be:

  • A one-unit single-family home, attached or detached
  • Valued at no more than $242,250
  • Located in Lake County

Federal government loans

Mortgage loans backed by the government — Federal Housing Authority (FHA), Veterans’ Administration (VA) and U.S. Department of Agriculture (USDA) — are available to first-time home buyers in Illinois. See table for details on each of these programs.

2022 Conventional 97% LTV (Loan-to-Value)

Fannie Mae’s Home Ready and Freddie Mac’s Home Possible Mortgage target low to moderate income home buyers. Both require only 3% down payment, a borrower’s annual income must be less than or equal to 80% local AMI, and PMI is canceled once your LTV reaches 80%.

What are first-time home buyer tax credit programs in Illinois?

The Mortgage Credit Certificate program run by the state of Illinois was suspended June 17, 2020, but there are local programs.

The TaxSmart Mortgage Credit Certificate (MCC) — administered by Chicago’s Department of Housing — allows qualified home buyers to claim a federal tax credit for a portion of their annual mortgage interest.

Here's what you should know about the TaxSmart MCC tax credit:

  • It's a dollar-for-dollar reduction against federal tax liability.
  • Currently you can deduct 25% of your home purchase cost, or 50% of your home improvement or renovation loan, from your tax bill annually.
  • The annual savings is capped at $2,000.
  • It may be claimed each year the home buyer continues to live in a home financed under this program.
  • Home buyers must apply for the MCC when obtaining the mortgage loan. After closing, home buyers cannot obtain an MCC.

Other local communities in Illinois may offer MCC programs. Contact the housing department of the community you’re interested in buying in for details.

What about the First-Time Homebuyer Act?
President Joe Biden's administration proposed a first-time home buyer tax credit in the First-Time Homebuyer Act in 2021. It put forward a $15,000 tax credit for first-time home buyers, but it hasn't passed.

What are first-time home buyer grant programs in Illinois?

While Illinois has no explicit first-time home buyer grant programs, it does have a loan that functions as a grant.

The IHDAccess Forgivable Loan doesn't have to be repaid if you live in your home for at least 10 years. The loan provides up to 4% of the purchase price up to $6,000 in assistance for down payment and closing costs.

IHDA offered a limited-time grant in 2019 called the IHDA Advantage Subsidy program, but it's no longer available.

In Chicago and the suburbs of Cook County, Neighborhood Housing Services of Chicago offers home buyers educational workshops. Once you get your certificate of completion, you can take it to certain lenders to qualify for down payment assistance and closing cost grants from $3,000 to $10,000. These certificates are valid for one year from the date of completion.

What assistance is available for first-time home buyers with low income?

Illinois Housing Development Authority (IHDA) programs can benefit low- to moderate-income home buyers, because you need to be below certain income and property price thresholds to qualify. Assistance with down payment and closing cost assistance as well as favorable mortgage rates also allow these first-time, low-income home buyers to save money on their home purchase.

Many federal programs offer zero down payment, low- interest rate mortgage loans, or relaxed credit score requirements make first-time home buyer purchases easier for those with low or very low income:

  • Fannie Mae’s Home Ready program
  • Freddie Mac’s Home Possible program
  • USDA Direct loans (specifically designed for low-income applicants in rural areas)
  • Veterans Affairs (for veterans, active service members, and spouses)

The IHDA Smart Buy Mortgage Program, created to help low- and moderate-income home buyers who are paying off student loans, ended May 21, 2021.

Who qualifies as a low-income buyer in Illinois?

To be considered low-income in Illinois, your income will have to be less than or equal to 80% of Fannie Mae's area median income (AMI) for your specific area.

For Chicago, 80% of AMI for a two-person household is $59,650. Households in Cook County have a median annual income of $69,429 — 80% of that is $55,543.

You can look up your AMI to see at what income level you qualify.

What assistance is available for first-time home buyers with disabilities in Illinois?

No current Illinois-specific programs exist at this time, though there are some great programs at the national level to assist first-time home buyers with disabilities.

Some options first-time home buyers with disabilities

The U.S. Department of Housing and Urban Development's (HUD)'s Housing Choice Voucher (HCV) program allows qualified buyers to use vouchers to buy a home and receive monthly assistance for homeownership expenses.

The U.S. Department of Agriculture (USDA) helps people with disabilities in rural communities achieve homeownership by guaranteeing mortgages made by community banks through its Single-Family Housing Guaranteed Loan Program.

Learn more about national resources for disabled first-time home buyers.

What's the process of buying a house for the first time?

As a first-time home buyer, you definitely want to know the programs that can assist you financially in purchasing a home in Illinois. But buying a home is a complex process. As a newbie, where do you start?

Step 1: Evaluate your financial situation

Address your credit score and existing debt-to-income ratio (DTI) to determine the first-time home buyers assistance programs for which you qualify.

Look at your savings with an eye toward what you might expect to spend on your down payment, closing costs, monthly payments, and maintenance costs for a new home. See the average costs for buying a median priced home in Illinois.

In Illinois, homeowners typically spend $2,265 on maintenance costs annually, but this can vary widely based on the house. In general, you should save 1% of the house's value each year for repairs.

Step 2: Choose the right neighborhood

The neighborhood you live in will impact everything from your daily commute, to where your kids go to school, to where you go out to eat (or order takeout!).

Fortunately, in Illinois you can surely find a place that fits your needs! There’s everything from trendy and up-and-coming neighborhoods like Wicker Park, Roscoe Village, Pilsen, or Jackson Park (home of the future Obama Presidential Library) in Chicago, to a college town like Champaign (home to the University of Illinois), to far southern Harrisburg, a town near the Shawnee National Forest.

Of course, since home values vary quite a bit in Illinois, you'll want to look at the average home prices for the neighborhood you’re interested in to see if you can afford to live there.

Step 3: Find a great real estate agent in Illinois

A good local real estate agent will be your trusted ally during the home-buying process. They can help make sure your home-buying process runs as smoothly as possible. Make sure your real estate agent has experience in your price range and neighborhood of choice, as well as high ratings and reviews online from happy clients.

Clever can match you with the right agent for you!

Depending on where you live, there can be thousands of buyer's agents in your area, making it overwhelming to find the perfect realtor. Luckily, Clever's concierge team can match you with hand-picked, local agents who will meet your needs. Our network of vetted agents have proven track records with home buyers in your area and will get you a great deal on your dream home.

Step 4: Get pre-approved for a mortgage

Most sellers won't show you their home unless you have a mortgage pre-approval letter. They don't want to waste their time with buyers who aren't serious or financially ready to put in an offer. And you don't want to waste your time falling in love with a home you can’t afford.

When shopping for a mortgage, compare interest rates and narrow down your choice of lenders based on terms they have to offer.

Once you're pre-approved for a mortgage, make sure your credit and financial situation doesn't change:

  • Avoid opening new credit accounts.
  • Don't close any accounts that have been open for a long time.
  • Make all of your credit card payments on time.

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

Step 5: Start house hunting in Illinois

This can be the fun part of home buying! But be prepared. Make sure you have a handle on what are must haves for your home versus nice to haves.

Depending on the time of year, you may have fewer home options to choose from. December, January, and February tend to be slow for home sales in Illinois, while August, September, and October are usually the busiest months.

Step 6: Make offers

Once you find a house you love, you’ll want to make an offer and convince the seller to sell to you. You’ll want to move quickly, particularly in July or August in Illinois, when inventory is at its lowest and buyers snap up homes fast.

You’ll want to work with a real estate agent who knows how to write a strong offer letter for the area you’re buying in.

Step 7: Inspections and appraisals

Once a seller accepts your offer, follow a series of due diligence steps to ensure the home you’re buying is exactly what you signed up for.

Inspections vs. appraisals

Inspection: A licensed professional checks the house for any unseen, unexpected, or potential issues.

Appraisal: An appraiser hired by your lender will examine the house and determine how much it's worth.

Aside from a general inspection, Illinois also recommends buyers have the following inspections and testing done before closing on a home:

  • Radon testing: While it's not required by law, Illinois strongly recommends buyers test homes for radon. If the seller hasn't had the house's radon levels tested recently, consider having it tested before closing on the home.
  • Termite inspection: If you're applying for a VA or FHA loan, you'll most likely be required to have a termite and pest inspection in Illinois.

After inspections and appraisals, you'll have a chance to go back to the negotiating table if something unexpected pops up and possibly get a price reduction if warranted.

Step 8: Final walkthrough and closing

Though not legally required in Illinois, it's customary for a real estate attorney to at least review the home purchase contract. And an attorney typically attends the closing to make sure the buyer understands the paperwork they're signing.

Your agent can recommend an attorney, but the final decision is yours. Interview lawyers before hiring them to make sure they have the experience you need. Your agent (or your lawyer) should explain every document before closing (there will be a ton!), but still ask any remaining questions you have before signing.

Do a final walkthrough of the property to ensure it's still in the expected condition. Stay focused so you don't miss anything. Bring your checklist of items that needed to be addressed from the inspection. And bring a trusted friend or family member with you, plus your real estate agent.

» DETAILS: 8 Steps to Buying a House in Illinois

FAQs for the first-time home buyer in Illinois

Although Illinois doesn't require buyers to use a real estate attorney to represent them in the purchase of property, it's customary to have a lawyer at least review a buyer's purchase agreement and other paperwork related to buying a house. The attorney may also be on hand to explain all the documents a buyer will need to sign at closing.

Yes, you may qualify as a first-time home buyer if you haven't owned a principal residence by yourself in three years.

For a conventional loan, you'll need a down payment of at least 20%. The average home value in Illinois is $217,672, so 20% would be $43,534.

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