FINANCING NEEDS

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.