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Have you heard about Illinois’ SmartBuy program?

No?

Well pull up a newspaper chair and pay attention.

This is a program of the state administered through the Illinois Housing and Development Authority (IDHA). Its purpose is to spur home ownership purchases by those who are otherwise held back from buying a home because of student loan debt.

The benefit for a buyer is in two parts.

One is that the program helps fund the purchase of a house. It provides a loan of up to $5,000 to pay the costs of down payment and/or closing costs in the purchase. The property must be a single-family home occupied as the primary residence of the borrower. The borrower has to contribute at least $1,000 of his/her owner funds in the purchase. The IDHA loan will have a second mortgage to the main mortgage loan the borrower will get from a lender to buy the house.

The IHDA loan will not become due until the first mortgage loan becomes due or is paid off. So, no monthly payments are required during the life of the first mortgage loan.

The IDHA loan will be forgiven if the home is owned for at least the first three years of ownership at a 1/36 prorated rate. If the borrower resells the house within the first three years, they will have to repay part of the IDHA loan and resell only to someone who themselves will be at a price within the program limits.

Also, the first mortgage loan must be one that is a fixed rate payable over 30 years. The IDHA loan can be prepaid.

Qualifying purchase prices of homes under this program are based on the county where the home is. The range is generally capped between $325,000 and to up to $500,000.

The second benefit of this program is that it will pay off the borrower’s student loan up to $40,000 or 15 percent of the house purchase price, whichever is lower. The student loan must be paid off in full at closing. Thus, if the IDHA funds can’t get the student loan paid in full because it’s over $40,000, the borrower is going to have to come up with the balance for the payoff.

Again, if the home is resold within the three-year limit, the pay back penalty mentioned on the IDHA closing loan is applicable to the student loan payoff.

The student loan must be in the name of the borrower. The debt must be from an eligible educational institution — which is an accredited public, nonprofit or for-profit college, university, vocational school or other postsecondary educational institution. The school must be eligible to participate in student aid programs administered by the U.S. Department of Education.

Borrowers will have to qualify with a minimum credit score of 640 and meet a total debt-to-income ratio of 45 percent.

The IDHA has a website discussing the details of qualification. It also has a list of pre-approved lending institutions one can use, of which there are currently over 40.

To date, only a couple dozen borrows have used this program. It has $25 million allotted to it until the funds are used up.

The buffet is open. Come on in. Your dream home awaits.

Brett Kepley is a lawyer with Land of Lincoln Legal Aid Inc. Send questions to The Law Q&A, 302 N. First St., Champaign, IL 61820.

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