Marilyn Kennedy Melia Adriana Salinas was feeling down riding the CTA train home from work one day last summer, having just been told by a mortgage lender that she wouldn't qualify for a loan on the two-flat she wanted unless she put up more cash. Things started looking up, though, when she looked up. "I glanced up and there was an ad for the `City Mortgage' program saying you could get money for a down payment," Salinas recalls. Salinas, single and 30, has had a tough time accumulating savings for a down payment, she says, because she's also paying on student loans and a car. Her fortuitous find has a wider lesson: Grants exist for a down payment or closing costs. Though the mortgage lending business has been whittling away at down payment requirements and making loans for all or nearly all of the purchase price, many would-be buyers still need an infusion of cash. Salinas' down payment grant from a program run by the City of Chicago's Department of Housing reduced the loan amount she needed and consequently her monthly payment, allowing the lender to approve her. For those not lucky enough to have a generous relative or friend providing cash, a good alternative is to find a grant. Many grant funds flow from the federal government to states, then counties, towns and non-profits to disburse to qualified home buyers. Some programs, such as Chicago's City Mortgage, are made possible by special bond offerings. To qualify for many of the programs, recipients often have to complete home-buying classes or counseling sessions. Also, an applicant's income often must fall below a certain level; 80 percent of the area median income is a popular target. In the Chicago area in 2003, a single person qualified if he or she earned less than $39,550 a year, while the income limit for a four-person household is $56,500. Those levels typically increase each spring, after the government crunches new income data, says Mary Arey of the Illinois Housing Development Authority. Money for many programs runs out because the number of applicants exceeds supply. Still, efforts to find and apply for a grant can be worth it, because the funds lower buyers' monthly payments and give them more equity in their property, notes Raphael W. Bostic, a professor of real estate at the University of Southern California. Grant programs should not be confused with down payment assistance offered by non-profits such as the Nehemiah Program or the AmeriDream Charity. Those organizations take a contribution from a home seller and then give the money to the buyer. Here are some of the buyer programs available in the Chicago area. Some listed here provide grants; others provide down payment money that the home buyer doesn't have to repay until the property is sold. - Affordable Housing Corp. of Lake County has a program in which eligible borrowers can qualify for up to $5,000. Money must be repaid, with no interest, when the property is sold. Household income must be at or less than 80 percent of area median. The purchase must be of a house, town home or condominium in Lake County costing less than $261,000. Call 847-263-7478 for a list of participating lenders. - Arlington Heights provides up to $14,999 in a forgivable loan on houses, townhouses or condos in the village to buyers at or below 80 percent of the area median income. The loan is forgiven at a rate of 20 percent a year. Buyers who stay in their home more than five years owe nothing back when they sell. For more information, call Nora Boyer, village housing planner, 847-368-5214. - The City of Chicago City Mortgage program provides up to 4 percent of the loan amount to buyers of one- to four-unit properties in Chicago that will be their primary residence. Buyers must have incomes below certain thresholds and purchase homes within certain price ranges. Buyers of homes in designated "target" areas are allowed higher limits. For instance, a household of at least three people buying in a target area can qualify with a total income of up to $105,560, while income of three-person households buying in non-target neighborhoods must be less than $86,710. The price of a house in a target area can be up to $272,800; in a non-target neighborhood, less than $223,200. Visit www.ci.chi.il.us/Housing/ or call 311 in the city and 312-747-9000 outside the city for a list of lenders who accept applications for the program. - The Cook County Home Buyer Program provides eligible borrowers with 2 percent of the purchase price of a home and 50 percent of the closing costs, but the total cannot exceed $5,000. Borrowers must have incomes at or less than 80 percent of the area median. The money must be repaid, with no interest, when the property is sold. Houses, townhouses and condos are eligible. Call 312-603-1062 for a list of lenders. - The Corporation for Affordable Homes of McHenry County provides up to $7,000 in a forgivable loan for down payment and closing costs for buyers of houses, town homes and condominiums in the county costing less than $160,000. Twenty percent of the loan is forgiven each year. Buyers who stay in their home five years don't pay anything back on the loan when the house is sold. Buyers must have incomes at or less than 80 percent of area median. Call 815-206-5805 for more information. - "Downpayment Plus," a program administered by the Chicago Federal Home Loan Bank, allows home buyers whose household income falls at or below 80 percent of the median income where they are buying to receive up to $4,000 that's forgiven if the home buyer stays in the house for five years. Owner-occupied one- to four-unit properties are eligible. Buyers must put at least $750 of their own toward the purchase. To apply for the program, buyers must contact one of the Chicago member banks of the Federal Home Loan Bank. A list of participating banks is available from Downpayment Plus administrators at the Illinois League of Financial Institutions, 217-522-5575, and at the Wisconsin Partnership for Housing Development, 888-318-4486.
