First-Time Homebuyer Programs in Illinois

The down payment on a new home often presents the biggest hurdle for first-time homebuyers. In Illinois, where the average home value is $265,991, you would need a down payment of $53,198 to avoid private mortgage insurance.

Fortunately, first-time homebuyer programs in Illinois can help you achieve homeownership. There are also mortgages that allow first-time buyers to put less down, but these usually have income requirements and require mortgage insurance. MoneyGeek explores several state-specific and government-backed first-time homebuyer programs for people from different financial backgrounds.

Illinois offers grants and loans to assist first-time homebuyers in covering down payment and closing costs. We compiled the first-time homebuyer programs offered by the Illinois Housing Development Authority to help you find the best option for your needs and situation.

The IHDAccess Forgivable program provides down payment assistance of up to 4% of the home's purchase price, with a maximum of $6,000. The assistance is offered as a forgivable second mortgage, which is forgiven on a pro rata basis over 10 years. Borrowers are required to use this program in conjunction with a 30-year fixed-rate IHDA first mortgage. The second mortgage has 0% interest with no monthly payments. Repayment is triggered if the home is sold, refinanced or transferred within the 10-year period.

The IHDAccess Deferred program offers 5% of the home’s purchase price, up to $7,500, in down payment and closing cost assistance. This is provided as a deferred second mortgage with 0% interest and no monthly payments. The full loan amount is due when the home is sold, refinanced or the first mortgage matures. This program is available for primary residence purchases and must be combined with an IHDA 30-year fixed-rate first mortgage.

The IHDAccess Repayable program provides up to 10% of the home’s purchase price, with a maximum of $10,000, in down payment and closing cost assistance. The assistance is offered as a repayable second mortgage with 0% interest over a 10-year term. Homebuyers are required to repay the loan in equal monthly installments, with no prepayment penalties for early repayment. The program must be used alongside an IHDA 30-year fixed-rate first mortgage.

Aside from statewide first-time homebuyer programs in Illinois, city-specific programs are available to help you pursue homeownership in a city of your choosing. Check out the table below for some of the cities in Illinois that provide first-time homebuyer programs for potential residents.

In Illinois, there are zero-down-payment loan programs that allow you to purchase a home without putting any money down. USDA and VA loans are two government-backed options that offer no down payment requirements.

USDA loans are designed to help individuals and families in rural areas purchase homes. Issued by the U.S. Department of Agriculture through its Rural Development Guaranteed Housing Loan program, these loans aim to make homeownership accessible to those who may not qualify for traditional financing.

USDA loans offer several advantages to homebuyers, including no-down-payment requirements, competitive interest rates and flexible credit criteria. These loans are intended to assist low-to-moderate-income households in rural areas, providing them with an opportunity to achieve homeownership without the financial burden typically associated with buying a home.

To be eligible for a USDA loan, your property must not exceed 2,000 square feet and should be located in a USDA-eligible rural area with a population of less than 35,000. There are also income limits based on your location. For instance, in Carroll County, Illinois, the income limit is $66,000, whereas in Scott County, Illinois, it is $72,400 for a four-person, low-income household.

VA loans are a home financing option provided by the U.S. Department of Veterans Affairs. These loans are designed to assist veterans, active-duty service members and eligible surviving spouses in purchasing homes. The program aims to make homeownership more accessible to those who have served their country.

VA loans offer several advantages that make them an attractive option for eligible borrowers. One of the most notable benefits is the no-down-payment requirement, which can significantly reduce the upfront cost of purchasing a home. VA loans also do not require private mortgage insurance (PMI), which can lower monthly payment costs. Typically, VA loans also have lower interest rates than private loans. As of November 2024, the APR for a 15-year fixed-rate VA loan in Illinois is 6.33%, while for a 30-year fixed-rate VA loan, it is 6.40%.

To qualify for a VA loan, you must meet certain eligibility criteria. These include specific service requirements such as length of service, duty status and character of service. Additionally, there are income limits based on your location that you must adhere to. A valid Certificate of Eligibility (COE) is also necessary to apply for a VA loan.

First-time homebuyers in Illinois can take advantage of low-down-payment loan programs that allow them to finance their home with a down payment of 3.5% or less. These programs include conventional, FHA and FHA 203(k) loans.

FHA loans and conventional loans are often compared as they are the two most common types of mortgages. FHA loans require a minimum down payment of 3.5%, while conventional loans require as low as 3% for first-time homebuyers. Conventional loans generally have stricter credit score and debt-to-income ratio requirements, making them less accessible for some borrowers.

As of November 2024, the current APR for a 15-year fixed-rate conforming loan in Illinois is 6.01%, whereas the APR for a 15-year fixed-rate FHA loan is 8.06%. FHA loans often have higher APRs due to additional fees and costs associated with government-backed loans.

You can use our FHA vs. conventional loan calculator below to help you compare FHA and conventional mortgage programs and determine the best option for you.

We have answered frequently asked questions about first-time homebuyer programs in Illinois to help you choose the best option and move closer to achieving homeownership.

Explore additional MoneyGeek resources for first-time homebuyers in Illinois to help you with the homebuying process.