With all the changes in the mortgage industry, underwriting is getting tighter and mortgage money is more expensive. With risk based pricing  buyers with lower down payments and Fico scores below 680 are getting squeezed. These buyers used to be considered great risks, but now they will be charged either a higher rate or higher fees for their conventional mortgage. Who does this affect most? First time home buyers.  As lenders pull back, many low and no down payment loan programs have disappeared. But there are still options, and if you live in Chicago, Illinois, one of the best programs is the City of Chicago Bond Program.

The Government, both local and national, has a real interest in getting more people to buy homes. Because of this they have come up with programs geared toward helping low and moderate income buyers buy with special terms. If you meet the guidelines, you can buy with a below market fixed rate mortgage. The City of Chicago Bond program also provides that the lender give the borrower a 4% grant of the purchase price at closing to pay for the down payment and closing costs. This means you can buy your new home with no money down.

The purpose of this program is to make housing more affordable for home buyers with low or moderate incomes. In order to qualify you need to conform to the income limits. But moderate income is relative, and this leaves room for a lot of people to qualify. For a single person the current limit is $60,320 per year for a non-targeted area, $72,384 if you are buying in a targeted area (targeted areas are lower income zip codes where they are encouraging redevelopment). For a family of 3 or more the limits go up to $86,710 for non-targeted areas, and $105,560 in a targeted area.

The value for a single family home cannot be higher than $325,894 in a non-targeted area, and up to $398,315 in a targeted area. You can go even higher if you are buying a 2-4 unit property. As you can see, this leaves a lot of flexibility for qualifying. This is normally a first time buyer program, but that restriction is waived if you buy in a targeted area. Some of the city’s hottest neighborhoods are in targeted areas.

The city sells bonds to cover this program, and the interest rate changes based on market conditions when the bonds are originated. The loan is on a first come first served basis. When a buyer gets a contract to purchase a home, the lender locks the loan in with the bond agency. When the money for that bond series is spent new buyers are put on a waiting list until the next series is issued. This is done on a regular basis, and the waiting list means you may be waiting for a couple of weeks at the most before the loan is filled.

If you qualify, this is one of the best ways to buy a new home in the city of Chicago. One thing to keep in mind, these programs are not available from every lender. They are only offered by mortgage bankers like myself, and aren’t available from mortgage brokers or most community banks. If you would like more information or if you want to see if you qualify, let me know.

There are other bond programs available in Illinois outside the Chicago city limits. I’ll go over these in later posts.

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