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Illinois Home Buyers Can Get a Loan Against the First Time Home Buyer Tax Credit (from www.BarkerBlog.com)

By John Barker

Mortgage and Lending with Affinity Lending Solutions NMLS #224832

August 06, 2009 05:31 AM

The Illinois Housing Development Authority (IHDA) has just announced a new program called Home Start. The Home Start program will offer first-time homebuyers (FTHB) a 30-Year FHA Fixed Mortgage and the option to receive a second mortgage to pay for the down payment on the home. This second mortgage would then be repaid when the buyers receive the tax credit when they file their 2009 tax returns next year. Click here for more information on the FTHB Tax Credit.

While the FTHB Tax Credit, which was created by the American Recovery and Reinvestment Act of 2009, is a great program for first time homebuyers, many people were still unable to purchase a home because they lacked the required down payment and were unable to access the tax credit until after they filed their 2009 tax returns.

On May 29, 2009 The Department of Housing and Urban Development (HUD) gave guidance to state housing boards, like IHDA, as to how they could assist these borrowers, who are eligible for the FTHB tax credit, obtain funds for the down payment, closing costs and prepaid expenses. (See my blog post on the tax credit from this past February for more info.)

The Illinois Home Start Advance Loan is a zero-interest loan for up to 3.5% (Maximum $6,000) of the purchase price of the home to be used toward the down payment of the home. In addition to this loan, the buyer must contribute a minimum of 1.0% of the sales price toward the purchase of the home. And receive homebuyer education through a HUD-Certified counselor. Other terms of the loan are:

Home purchase a mortgage loan must close prior to November 30, 2009.

A $300 application fee must be paid at closing. Tax advance loan may be used.

Tax advance loan must be repaid, in full, by June 30, 2010. If it is not repaid by then, the loan becomes a 10-year, fixed-rate, fully-amortizing loan at 0.5% about the rate on the 30-year fixed first mortgage.