FINANCING NEEDS

CITY OF CHICAGO TAXSMART (tax smart), CITY MORTGAGE AND HOME BUYER LOAN PROGRAMS

There are numerous Chicago area loan programs for home buyers.  Some are quite beneficial and useful and some could be avoided.  For a city of chicago mortgage program to fit your needs, we would need to determine your current and future financial status, home retention expectancy, current cost of funds in the mortgage market and program availability of that market (some programs run short on funding frequently).  It could very well be possible that grant monies from the city for costs would not be the best option depending on marginal tax brackets and whether concessions could be obtained.  These are just some of the strategies to be aware of when obtaining any City of Chicago mortgage, public safety officer (police, firefighter, paramedics etc.) or other home buyer programs.

Chicago City Mortgage Program (discontinued indefinitely)

The City Mortgage program offered is beneficial to first time or target area home buyers who have limited to no funds available for reserve and potentially cannot secure concessions to offset the closing costs, prepaid items and discount.  Qualified buyers meeting the income limit and purchase price limits are eligible to purchase 1-4 unit properties in the City of Chicago.  The program is available citywide in all zip codes as long as qualifying guidelines are met.  Federal laws imposed require that a home buyer satisfy each of the following:

  • Must be a First Time Home Buyer or Property Must Be Located in a Target Area (call us when a property is identified and we will determine if it is located in such area) - A First Time Home Buyer is classified as any person who has not owned a principal residence at any time within the prior three years.  Non first time home buyers are also eligible if they purchase a home in such designated target areas.
  • Must Meet Income Requirements - Since the City of Chicago's program is intended to benefit low and moderate income households and improve specific neighborhoods, federal law mandates maximum limits on the annual gross income of home buyers (Call us for to verify your income...there are some loopholes to this).
  • Purchase Prices - Federal law has also imposed limits on the purchase price of homes financed under the program.
  • Must Be a Principal Residence - A home buyer must occupy the home as a primary residence within a reasonable period which, under most circumstances, may not exceed 30 days after closing.  A primary residence is occupied primarily for residential purposes and does not constitute a home used for investment purpose, as a recreational home or a home in which 15 percent or more of its total area is used for a trade or business.
  • Number of Units: One-to-Four-Family Home - Any residence financed must contain 1-4 units.  A one-family residence includes a detached home, one unit of a duplex, a townhouse or a condominium unit.  If the residence is a 2-4 unit building, one unit of the residences must be the primary residence of the home buyer.  Down payment requirements and guidelines differ on 2-4 unit purchases.

First time home buyers must receive pre-purchase counseling to be eligible (regardless of down payment) and must provide a Certificate of Completion of pre-purchase counseling with their applications.  See the list of housing counseling agencies at the bottom of this page.  I recommend  Chicago Urban League or Acorn for counseling.

 

Chicago Public Safety Officer Grant/Mortgage Program

Chicago police officers, firefighters, and paramedics (referred to as “public safety officers") may be eligible to receive $3,000 in down payment and closing costs assistance.  If the property is located in a CHA Redevelopment Property (defined as a residential development constructed as part of the CHA Plan for Transformation, as designated by the Chicago Housing Authority), $7,500 in assistance may be available.  These are usually the older and larger community rental apartment buildings once housing low to moderate income citizens.  The public deferred loan is available per household and may be used for a down payment or closing costs, including title insurance; credit reports; recording fees; appraisals; points; transfer stamps; third-party property inspection fees; first year's payment of mortgage insurance; and other customary bank related closing charges.  This loan will be fully forgiven if the officer resides in the home for at least five years.  Program Requirements are as follows:

  • The home buyer must be a non-probationary police officer with the Chicago Police Department or a non-probationary firefighter or paramedic with the Chicago Fire Department.
  • Assistance is only available for properties located within the City of Chicago.
  • The home buyer must be purchasing a primary residence, 1-4 units, located within a low to moderate census tract in Chicago (minimum of 50% of the residents have incomes below 80% of the area median income) or within a CHA Redevelopment Property.
  • The public safety officer must be a borrower on the mortgage loan and must occupy the acquired home as his or her primary residence for at least five (5) years after acquisition.
  • The public safety officer must contribute at least 1% of personal funds towards the down payment on the purchase price of the property. (call us as there are some loopholes regarding this)

 

Chicago City Lots for City Living Program

City lots for city living is an affordable housing program allowing eligible applicants to purchase vacant City-owned property.  Land can be used as sites for single-family (1-4 units) - owner-occupied.  The department of housing (DOH) determines the land sales price based on the appraised value, discounted by up to $20,000, plus reasonable transaction costs.  Larger discounts may be recommended for lots which accommodate multiple units.  

    Home ownership

Regarding owner-occupied homes, home buyers must have incomes no greater than 120% of the area median income (Call us to determine eligibility).  Also, in conjunction with income limitations, the housing prices may not exceed a total development cost of $165,000.  Please note that for owner-occupied two- and three-flats, the rent levels for the rental units and income requirements regarding tenants will follow the City’s rental housing requirements:

  • The housing must meet all City zoning and building code requirements and design matters criteria.  Any zoning changes that may be required by the development will be the responsibility of the developer and not the home buyer.
  • Once properties have been conveyed, purchasers have 18 months in which to complete construction.

    Application Process

The department of housing will be responsible for reviewing and appropriating applications for City Council approval.  Applicants must submit a completed application, which shall include:

  • site plans
  • floor plans
  • development cost summary, including source of funds
  • proposed rent levels or sale price
  • marketing plan, if applicable.

In addition, applicants will need to provide a building permit prior to conveyance.  DOH will also be responsible for monitoring properties for compliance with the affordability guidelines.  First-time homebuyers must receive pre-purchase counseling to be eligible (regardless of down payment) and must provide a Certificate of Completion of pre-purchase counseling with their applications.  See the list of housing counseling agencies.  We recommend Chicago Urban League or Acorn for counseling.

Application Download

 

Chicago TaxSmart (Tax Smart) Mortgage Credit Certificate Program

TaxSmart (Tax Smart) is a Mortgage Credit Certificate (MCC) program that provides a direct federal income tax credit to qualified home buyers.  A tax credit is actually a direct reduction of taxes otherwise due by the borrower/home owner. Under the program, a home buyer would receive an MCC to reduce income taxes by an amount equal to 20% of the interest paid on a mortgage.  The tax credit may be claimed each year the home buyer continues to live in a home financed under this program.  Federal laws imposed require that a homebuyer satisfy each of the following:

  • Must be a First-Time Home Buyer or Property Must Be Located in a Target Area (call us when a property is identified and we will determine if it is located in a target area)- A First Time Home Buyer is classified as any person who has not owned a principal residence at any time within the prior three years.  Non first time home buyers are also eligible if they purchase a home in such designated target areas.
  • Must Meet Income Requirements - Since the city of Chicago’s home buyer programs are intended to benefit low and moderate income households and improve specific neighborhoods, federal law mandates maximum limits on the annual gross income of home buyers (Call us for to verify your income...there are some loopholes to this).
  • Purchase Prices - Federal law has also imposed limits on the purchase price of homes financed under the program.
  • Must Be a Principal Residence - The home buyer must occupy the home as a primary residence within a reasonable period which, under most circumstances, may not exceed 60 days after closing.  A primary residence is occupied primarily for residential purposes and does not constitute a home used for investment purpose, as a recreational home or a home in which 15 percent or more of its total area is used for a trade or business
  • One-to-Four-Family Home - Each residence financed must contain 1-4 units.  A one-family residence includes a detached home, one unit of a duplex, a townhouse or a condominium unit. If the residence is a 2-4 unit building, one unit of the residence must be the principal residence of the building owner and the residence must have been first occupied for residential purposes at least five years prior to applying for a mortgage loan financed in connection with the MCC.
  • New Mortgage - Any mortgage loan financed in connection with a mortgage credit certificate is required to be a new purchase mortgage and may not replace a prior mortgage on the home (refinance).  The tax credit is still retained upon refinancing the purchase money loan used for acquisition.  You do not lose the benefit by refinancing after the initial acquisition.
  • Program Area - In order to be eligible for a certificate, the home financed under the program must be located in the City of Chicago.

Under the TaxSmart program, mortgage credit certificates will only be issued to eligible home buyers on a first-come, first-served basis.  The certificates are available in connection with any type of mortgage loan (with the exception of loans from tax-exempt bond programs), including fixed, interest only and adjustable rate mortgages.  First-time home buyers must receive pre-purchase counseling to be eligible and must provide a Certificate of Completion of pre-purchase counseling with their applications (DEPENDING upon down payment; this is variable).  See the list of housing counseling agencies.  We recommend Chicago Urban League or Acorn for counseling. 

CALL
JON MILLER
DIRECTLY AT:
312.738.6013 jmiller@chicagobancorp.com