Student Loan Payoff Program for Illinois Homebuyers
We all know Illinois is bleeding residents. With our high taxes and high cost of living, residents are fleeing. So it’s not unusual that Illinois is trying to be creative to bring people back in. The Illinois Housing Development Authority (IHDA) has developed the SmartBuy program, which not only provides a loan of $5,000 for closing costs, but also helps pay off student loans.
And the state isn’t just paying off small amounts of student loan debt, either. They are paying off up to $40,000 of debt, or 15% of the purchase price of the home, whichever is less. If the student buys a home for $266,700 or more, they would get the full $40,000 in student debt relief.
What do you need to know? Here’s a simple list:
- There are income and purchase price limits, which you can find here. For example, if you live in the Chicago area, to apply for this program, your household income is capped at $109,200.
- The home you are buying must be your primary residence.
- The interest rate is set by IHDA.
- You must have at least $1,000 in student loan debt.
- The student loan debt must be in your name.
- Your mid credit report score must be 640 or above. This means when looking at your three credit scores from Equifax, Transunion, and Experian, the middle score must be 640 or above.
- The loan can only be used toward a purchase. You cannot apply it toward a home you have already purchased, even if it was a very recent purchase.
- You must apply through an approved lender. A list of approved lenders can be found on the SmartBuy program’s website.
The loan will be recorded against your property as a second mortgage. Every month for the first three years, 1/36 of the loan will be forgiven. If you buy a home through the program and sell it within three years, you will need to pay back part of the loan assistance based on when you sold it. Not only that, if you sell the home within the first three years, the people who buy it from you must fall within IHDA’s income and purchase price limits. These restrictions are gone after 36 months.
So what’s the catch? If you qualify under this program, you must pay off your entire student loan debt all at once. That means if your student loan debt is greater than $40,000, you will need to bring in the difference to pay it off. It’s all or nothing. On the plus side, if your student loan debt is less than $40,000, provided you are buying a home valued at $266,700 or more, IHDA will pay it off for you. Also, if there is more than one borrower, the loan can be applied to pay off both debts. But again, both student loans must be paid in full, even if that means you need to bring in additional money.
IHDA reports that nearly 200 people have applied for the program between December of 2020 and March of 2021. Nearly 30 people had bought and closed homes through the program as of late March. If you’re thinking of buying a home and need some help to make it happen, look into the SmartBuy program and see if it might be a good fit for you!