SmartBuy Program Offers up to $40,000 to Pay Off Student Debt for New Home Buyers

Naheed AmdaniNo CommentsUncategorized

If student debt is holding you back from buying a home, the Illinois Housing Development Authority (IHDA) may have a solution.  Provided you meet certain criteria, IHDA’s SmartBuy program will not only give you $5,000 towards your down payment or closing costs, but it will also PAY OFF YOUR STUDENT DEBT, UP TO $40,000.  It does not matter where you live now.  As long as you are buying a home in Illinois and plan to move in within 60 days after you purchase your home, and you meet the other eligibility criteria listed below, you may qualify for SmartBuy.

SmartBuy eligibility is based on the following:

  1. The property you purchase must be your primary residence.  If you currently own a home and intend to purchase your next home with SmartBuy, your lender will decide if you are able to own both homes or if you need to sell the first one to qualify for the SmartBuy program.
  2. Your credit score must be at least 640.  Please note that your lender will not average your credit scores from all three major credit bureaus.  Rather, to qualify for SmartBuy, your lender will order your credit score from all three major credit bureaus and use the score that’s in the middle.  Additionally, in some instances your lender may be able to use your lowest or only credit score to qualify you, so long as the score is over 640.  This will be handled case by case through your lender.
  3. If you have a co-borrower, they must also intend to occupy the property within 60 days of closing.
  4. Co-signers are not allowed.
  5. You must complete homeownership education requirements.  Your lender will provide more details about this and advise what class you should take.  You can also find a list of the approved classes here.
  6. Your student loan debt must be from an accredited educational institution, such as a university, public or private college, trade school, vocational school or post-secondary educational institute.  Note that your school must be eligible to participate in U.S. Department of Education student aid programs.
  7. Your student loan must either be current or in deferred status.  If your loan is in default, you are not eligible for SmartBuy.  However, if you catch up on your payments and bring them current, you can be eligible for SmartBuy.  A default that has been cured does not disqualify you from the SmartBuy program.
  8. $40,000 must be enough to pay your student loan off IN FULL.  If it is not, you will need to come up with the difference at closing.  SmartBuy will not allow the loan to be partially paid off.  You will need to certify that your student loan debt is being paid in full.  Note if you have a co-borrower, and your outstanding student loan balance is less than $40,000, the balance of the $40,000 can be used to pay off your co-borrower’s student loan, but only if the co-borrower’s student loan will also be paid off in full.  In the alternative, your co-borrower is not required to pay off their student loan.
  9. Current students may also qualify under SmartBuy, provided their student loan debt is paid off in full through SmartBuy.
  10. Generally you cannot qualify for both SmartBuy and another homeownership assistance program through IHDA.  However, this should be discussed with your lender.  There are other non-IHDA programs that you may qualify for.
  11. Depending on which county you are purchasing in, there are income and purchase price limits that apply.  To see if your purchase may qualify, you can look at the chart prepared by IHDA here.

Of note, every home does not qualify.  You cannot use SmartBuy to purchase properties over five (5) acres, most mixed-use properties, a log home, a mobile home, a manufactured home, a dome home, or a home on multiple parcels where another parcel might be “buildable”.    The good news is that single family homes, 2-flats, townhomes, new construction, co-ops, most condominiums, modular homes, and properties in community land trusts do qualify for SmartBuy.  Also, SmartBuy funds cannot be used to pay off a Parents Plus loan.

If you are interested in the SmartBuy program, you must first find a lender that can help you through the process.  SmartBuy approved lenders are listed here.  A good lender will guide you through the process and make sure you meet all eligibility criteria.  You can apply with a lender even if you have not found your house yet.  In fact, it might be a good idea to go ahead and do so; that way you can confirm you will be eligible for SmartBuy.  The lender will not, however, be able to guarantee SmartBuy funding until you’ve actually found a home and completed the lender’s full underwriting process.  If you have gone through bankruptcy or have been foreclosed, you should also determine your eligibility as soon as possible.  While SmartBuy does not necessarily disqualify people who have gone through bankruptcy, you may not be able to secure the full loan amount you need from the bank if enough time has not passed.

If your dream of being a homeowner has been delayed because of your student loan debt, SmartBuy may be the solution you need!