Illinois Home Purchase Down Payment Requirements
This article covers Illinois Home Purchase Down Payment Requirements
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:
- Every loan program has its own down payment requirements:
- FHA requires a 3.5% down payment.
- Fannie Mae and Freddie Mac require a 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 a 5% down payment.
- Most Jumbo Lenders require a 20% down payment.
- Non-QM Loans require a 10% to 20% down payment.
- Investment homes require a 20% down payment..
- Second homes require a 10% down payment.
- Condotel Lenders require a 25% down payment.
- Hard Money Lenders require a 20% plus down payment.
- Flip and Flip and rehab loans require 15% on the property purchase and a 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.
Using Property Tax Prorations For Down Payment
Here is a case scenario on how buyers on an Illinois Home Purchase can use property tax prorations for their down payment:
Let’s take a scenario where a home buyer purchases a home in Illinois for $100,000 with an FHA Loan:
- Homebuyer needs 3.5% down payment on an FHA home loan
- 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 need to credit home buyer $2,000 in property
- The buyer can use the $2,000 towards the down payment
- Borrowers cannot use sellers concessions for the down payment
- But they can use property tax prorations
The net amount borrower need for cash to close for a down payment is $1,500:
- $3,500 minus $2,000 property tax proration credit yields $1,500
Mortgage Guidelines On FHA Loans
FHA Loan programs are the best loan program for a first-time home buyer who 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 to make the American dream of homeownership 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 to closing costs through sellers’ concessions If buyers are short on closing costs, lenders can give lender credit to borrowers Homebuyers do not have to come up with any closing costs with a combination of sellers concessions and/or lender credit.
FHA Loan Requirements
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 a 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 the down payment
- Closing costs can be paid by the lender with a 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
- The three-year waiting period after the recorded date of foreclosure and/or deed in lieu of foreclosure
The three-year waiting period after a short sale to qualify for FHA Loans.
Sellers Concessions Guidelines
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. Below is the maximum seller’s concession allowed by the home seller:
- 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 consist of third-party charges. Examples of closing costs are the following:
- Title charges
- Tax stamps
- Transfer stamps
- Attorneys fees
- Origination fees
- Inspection fees
- Appraisal fees
- Underwriting fees
- Points to buy down rates
- Other third-party fees charged in order to close the loan
Gift Funds For Down Payment On Illinois Home Purchase
Homebuyers can accept 100% down payment assistance from family members and/or relatives on FHA Loans. Down payment assistance is allowed by family only.
There are occasions where lenders will accept down payment assistance from a friend who has known the borrower for a least five years.
Illinois Home Purchase: 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 For Down Payment On Illinois Home Purchase
Borrowers can use their 401k and/or retirement accounts for the down payment on a home purchase. Homebuyers with any questions about how much money they need to purchase a home, please contact Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, and holidays.