Student Loan Relief Program Helps Young Homebuyers in Illinois
Historically low mortgage rates are making homeownership more affordable for homebuyers at all stages of life. But for nearly 45 million Americans, student loans are standing in the way of their homeownership dreams. The National Association of REALTORS® (NAR) reports that 24% of all home buyers have student debt. However, younger buyers carry the bulk of student loans with 46% of buyers ages 22-29 reporting outstanding student loans and 38% of buyers ages 30-39 doing the same.
In Illinois, Governor JB Pritzker has announced the creation of the SmartBuy program which will offer financial assistance to address the barriers to homeownership created by student loan debt. Illinois Treasurer Michale Frerichs reported in a statement that “17% of Illinois residents – more than 2 million people – carry student loan debt, the average value of which is $29,855.” Across the board, student loan debt has been shown to negatively impact wealth accumulation.
The SmartBuy program uses funds awarded to the Illinois Housing Development Authority (IHDA) to help all borrowers, not just first-time homebuyers, buy a home in spite of their outstanding student loans.
Potential borrowers can receive down payment or closing cost assistance and student loan debt relief with this new program.
- Down Payment or Closing Cost Assistance: SmartBuy offers qualified applicants a 30-year fixed rate first mortgage with a deferred $5,000 that can be used for a down payment or closing costs.
- Student Loan Relief: SmartBuy provides 15% of the purchase price (up to $40,000) for student debt relief.
Applicants must meet specific criteria to qualify for the SmartBuy program and adhere to specific guidelines to receive full relief.
- Must have at least $1,000 of student debt.
- Must be purchasing a primary residence in the state of Illinois.
- Must have a FICO “mid-score” of at least 640.
- Must adhere to income and purchase price limits for the county you’re buying in.
- Must have a debt-to-income ratio of no more than 45%.
- Must be used to purchase a qualified single-family dwelling.
- Must complete homeownership education courses.
- Guidelines for Usage
- At the time of closing, the student loan debt of at least one borrower must be paid off in its entirety.
- If 15% of the purchase price isn’t enough to cover the entire loan, borrowers must bring additional money to cover the difference.
- Funds are given in the form of a promissory note.
- The transaction includes a deed restriction with a 3-year term. If the borrowers sell their home before their 3-year term is up, they will need to sell to another buyer who meets IDHA requirements.
The IDHA has a list of approved lenders you can contact to start the application process.
In the past 10 years, student debt has increased by over 100%. The SmartBuy program offers homebuyers an opportunity to build wealth despite their outstanding loans. State Representative Bob Morgan (D-Deerfield) said, “At a time when student loans are an obstacle for so many young people – especially in communities of color – the innovative SmartBuy Program will turn this debt into an opportunity for younger generations to buy a home and invest in their future.” He continued, “I am proud the Governor is taking up the cause and joining in championing issues that can help our young families in Illinois.”