State Hoping To Lure First-Time Homebuyers, Veterans With Incentive

November 9th, 2009 categories: Chicago Info/News, Economic Recovery, For Buyers, Housing Market, Taxes

Chicago home buyers got the good news last week that the federal government was not only extending its first-time home buyer tax credit of $8,000, but was adding a $6,500 move-up home buyer tax credit, too. Combined, the two federal programs should make it easier for the majority of home buyers to afford condominiums or single-family homes in Chicago.

As if that wasn’t enough good news, Chicago Tribune writer Mary Ellen Podmolik in the Nov. 6 paper highlighted another new program, this one offered by the state of Illinois, to encourage both first-time buyers and military veterans to buy homes.

The state had already offered its HOME START program, a 30-year fixed-rate amortizing loan insured by the FHA. As of Oct. 30, the interest rate on this loan was just 5.25 percent. Now, though, the state has offered a companion piece to this program, the HOME START down payment assistance loan. This loan allows first-time home buyers to access additional funds to help them make their down payments. The loan is a 10-year, zero-percent, non-amortizing forgivable loan equal to 3 percent of the home’s purchase price. The loan does have a ceiling of $6,000.

To take advantage of the down payment assistance loan, buyers must first qualify for and obtain the Illinois Housing Development Authority’s 30-year HOME START mortgage. Military veterans do not have to be first-time buyers, but all other participants do. The program does require buyers to receive homeownership counseling.

The main benefit of this second down-payment loan is that it can easily become a forgivable loan. Buyers must simply stay in their homes for at least 10 years. Those who stay less will be required to pay back a certain portion of their loan depending on how long they stay in the house. In her story, Podmolik says that a homeowner who purchases a $100,000 house and only stays in it for five years will have to pay $1,500 of the $3,000 down-payment loan back to the state.

We already know, based on national statistics, that the first-time home buyer tax credit did its job, encouraging more buyers to enter the housing market. I’ll be eager to see what impact Illinois’ new housing incentive has. My guess? It’ll encourage even more locals, including those looking for homes in Chicago, to enter the residential real estate market.

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