The No Down Payment Mortgage Is Back With Free Government Money

The No Down Payment Mortgage Is Back With Free Government Money

Late last year I wrote about a lender giving away free money - up to $20,850 - to home buyers in certain areas around Chicago. It was indirectly related to government interference in the housing market. But late last week one of our lenders - Russ Martin of Perl Mortgage - reminded me of a City of Chicago/ Cook County program for giving away more free money to home buyers. It looks like the no down payment mortgage is essentially back and let's be real clear that it's the government promoting it and not some evil lender trying to take advantage of the unsuspecting by giving them money.

Apparently there are different flavors of the program out there depending upon who the lender is because I've seen different versions of it running around. The City of Chicago Home Buyer Assistance Program is described as follows on the city's Web site:

  • Annual income of $88,435 or less and a credit score of 580 or better or an annual income of $131,775 or less and a credit score of 640 or better.
  • Buyers can get a grant for up to 7% of the loan amount within the conforming limit, which is currently $424,100. That means the government will basically give you up to $29,687.
  • The grant money can be applied to both the down payment and the closing costs.
  • The buyer has to contribute 1% of the purchase price or $1000, whichever is less. That essentially allows you to get a no down payment mortgage.
  • Buyers have to complete an 8 hour home buyer education class.

As I mentioned there appear to be different flavors of this program out there. For instance, the city of Chicago says nothing about homes in Cook County but the Perl Mortgage program does extend to the rest of the county while I've seen other programs that are only good for the Cook County suburbs. Also, the Perl Mortgage program is limited to a 6% grant and their credit score cutoff is 620 across the board.

In addition, the city of Chicago doesn't provide a lot of the fine print type of information that I was able to get from Perl Mortgage but I presume it's the same:

  • If a couple can qualify for the program and the mortgage under the name of just one person then it doesn't matter what the other person makes. So you can have a two income couple where one makes a million a year and the other makes $130K and they will get the grant!
  • The interest rate might be on the high side, as it should be for a riskier loan - like maybe 1.75% higher than normal.
  • The grant is treated as a forgiveable loan over 5 years. So if you sell within that time period you have to pay back a prorated balance.

I think it's wonderful that Chicago is so awash in cash that they can afford to give money away like this because they have decided that owning a home is better for you than renting. And they have so much of this money available that they can give it to people making up to $131,775, which is pretty high. That means most Chicago area realtors would qualify.

Nevertheless, whether you need the money or not (That sounds stupid. Doesn't everyone always need more money?) you might as well take it if you qualify, right? Don't be like the people in this video and assume that this has to be too good to be true or it's for someone else. This is for real.

#HomeBuying #DumbIdeas

Gary Lucido is the President of Lucid Realty, the Chicago area's full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider's view of the seamy underbelly of the real estate industry, or you just think he's the next Kurt Vonnegut you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.

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