Illinois Home Purchase Down Payment Requirements

Illinois Home Purchase Down Payment Requirements

This ARTICLE On Illinois Home Purchase Down Payment Requirements Was Written By Gustan Cho NMLS 873293

All home purchase transactions require down payment and closing costs. The amount of down payment required depends on the type of loan program.

Here are the down payment requirements

  • FHA requires 3.5% down payment
  • Fannie Mae and Freddie Mac require 3% to 5% down payment for conventional loans
  • VA Loans and USDA Loans do not require any down payment on home purchases
  • Gustan Cho Associates offers Jumbo mortgages with 10% down payment but most Jumbo Lenders require 20% down payment
  • Non-QM Loans require 10% to 20% down payment
  • Investment homes require 20% down payment
  • Second homes require 10% down payment
  • Condotel Lenders require 25% down payment
  • Hard Money Lenders require 20% plus down payment
  • Flip and Flip and rehab loans require 15% on the property purchase and 10% down payment on the rehab cost

Illinois Home Purchase Down Payment Requirements Due To Property Tax Proration Credits

Illinois Home Purchase Down Payment Requirements is different than most other states due to property tax proration credits. Illinois homeowners pay their property taxes in arrears so when a home seller sells their home, they owe one year property tax proration credits to the home buyer. The great news is that buyers of an Illinois home purchase can use the property tax proration credits towards their down payment and/or closing costs.

Here is a case scenario on how buyers on an Illinois Home Purchase can use property tax prorations for their down payment:

  • Lets take a scenario where a home buyer purchases a home in Illinois for $100,000 with a FHA Loan
  • Home buyer needs 3.5% down payment on a FHA home loan and needs to show that they have 3.5% of the $100,000 purchase price or $3,500
  • Let’s say the property taxes are $2,000
  • Sellers of the property needs to credit home buyer $2,000 in property and buyer can use the $2,000 towards down payment
  • Borrowers cannot use sellers concessions for down payment but they can use property tax prorations
  • Net amount borrower need for cash to close for down payment is $1,500: $3,500 minus $2,000 property tax proration credit yields $1,500

 FHA Loans

FHA Loan programs is the best loan program for a first time home buyer can buy a home due to lax credit and debt to income ratio requirements.  It makes it possible for every hard working family to be able to own a home in America.  The FHA mortgage program allows for folks with very little money make the American dream of home ownership come true.  All you need as a down payment is 3.5%.  There are closing costs that home buyers will need to pay and closing costs can run into the thousands.  Many times, closing costs are more than the actual down payment but FHA allows for sellers to contribute for closing costs through sellers concessions. If buyers are short on closing costs, lenders can give lender credit to borrowers where home buyers do not have to come up with any closing costs.

Here Are The FHA Loan Requirements

  • Minimum credit scores required for a 3.5% down payment home purchase FHA Loan is 580 FICO
  • Borrowers can qualify for FHA Loans under 580 FICO but need 10% down payment
  • Collections and charge off accounts do not have to be paid to qualify for FHA Loans
  • Debt to income ratios can be capped at 56.9% DTI back end and 46.9% DTI front end
  • 100% gifted funds allowed for down payment
  • Closing costs can be paid by lender with lender credit
  • Sellers concessions up to 6% allowed
  • No limit on the amount of non-occupant co-borrowers
  • Borrowers who are under Chapter 13 Bankruptcy repayment plan can qualify one year into a Chapter 13 with Trustee Approval
  • No waiting period after Chapter 13 Bankruptcy discharged date
  • Two year waiting period after Chapter 7 Bankruptcy discharged date
  • Three year waiting period after recorded date of foreclosure and/or deed in lieu of foreclosure
  • Three year waiting period after short sale to qualify for FHA Loans

Sellers Concessions

A home buyer can request a seller’s concession, or also known as a seller contribution, of up to 6% on FHA Loans of the purchase price of the home.

Sellers Concessions Allowed

  • FHA Loans 6%
  • VA Loans 4%
  • USDA Loans 6%
  • Conventional Loans 3% for owner occupied and second homes and 2% for investment properties
  • Non-QM Loans allow up to 6% in sellers concessions

The seller’s concession can only be used to cover closing costs and not the down payment.  Closing costs consists of third party charges. Example of closing costs are the following:

  • Title charges
  • Tax stamps
  • Transfer stamps
  • Attorneys fees
  • Origination fees
  • Inspection fees
  • Appraisal fees
  • Underwriting fees
  • Pre-Paids
  • Points to buy down rates
  • Other third party fees charged in order to close the loan

Gift Funds For Down Payment

Home buyers can accept 100% down payment assistance from family members and/or relatives on FHA Loans.  Down payment assistance is allowed by family only but there are occasions where lenders will accept down payment assistance from a friend who has known the mortgage loan borrower for a least five years.

Down Payment Assistance Grants

Many local and state agencies run bond programs to generate funds to help individuals and families with a down payment. Contrary to public thinking, these bond issues are not a type of welfare. The government knows that it can be tough to buy that first home, especially on a limited income.

Most agencies are income sensitive, but you may be surprised by the high level of acceptable income. The income level is especially high if you have children or dependents. Most agencies also have purchase limits, but they are adjusted to the income qualifications level.

Other Sources For Down Payment

Borrowers can use their 401k and/or retirement accounts for down payment on a home purchase. If you are a home buyer and have questions about how much money you need to purchase a home, please contact Gustan Cho at 262-767-1965 or text Gustan on his cell at 262-716-8151 for faster response. You can also email us at The Gustan Cho Team is available 7 days a week, evenings, and holidays.

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