Chicago Tribune
Marilyn Kennedy Melia
February 5, 2006

Struggling to make the leap from renter to homeowner?

The government would like to see you make the jump and is willing to provide some cash as a springboard.

The government encourages homeownership through a number of incentives.
The most well-known is probably the ability of homeowners to deduct
mortgage interest from their taxable income.

Fewer people are probably aware that tax dollars are available to help
first-time home buyers accumulate a down payment and closing costs.
These dollars, offered as forgivable loans, amount to a tiny sum
compared to other tax breaks, such as mortgage interest deductibility,
says Thomas Davidoff, a housing economist at the University of
California at Berkeley.

While the money is limited, local sources report that they’re not always claimed by struggling first-time buyers.

The village of Arlington Heights, for instance, has awarded four
forgivable loans for the current grant year, which runs from March to
March. For the previous year, 10 forgivable loans were provided. Money
is allocated based on the previous year’s activity, says Nora Boyer,
village housing planner.

Government money earmarked to encourage home buying typically flows to
non-profit housing or community groups or local governmental entities
to distribute to eligible home buyers. Additionally, some banks and
mortgage lenders have down-payment assistance programs to comply with
federal regulations on boosting mortgage availability, says Geoff Smith
of the Woodstock Institute, a Chicago non-profit that studies housing

Eligibility rules can vary according to the particular program, but
usually the buyer’s household income can’t exceed 80 percent of the
area’s median income. That’s $40,600 for a one-person household,
$46,400 for a two-person household, $52,500 for three, and $58,000 for
four in the Chicago metro area. The federal government typically
revises those figures in spring.

In some cases, there are also restrictions on the purchase price of a
home. Some programs don’t have price limits, but administrators say
that those below the median income level have to hunt for a home with
an affordable price tag.

The median home price in the Chicago metro area at the end of last year
was $261,000, according to figures from the National Association of
Realtors. Assuming a buyer put a 5 percent down payment on a $261,000
home, his monthly mortgage, taxes and insurance costs would be near
$2,000 with a 6 percent mortgage, says Reed Brunzell, a loan consultant
with Hartford Financial in Skokie. Most lenders would like to see an
annual income of nearly $80,000 for that amount, Brunzell says. So, a
lower-income borrower who doesn’t have lots of cash for a down payment
has to find a home priced below the median, defined as the midpoint on
the price scale. Landing down-payment assistance is somewhat akin to
winning a college scholarship. You have to ferret out the opportunity,
apply and meet eligibility requirements. Home buying involves a set of
complicated steps, such as getting loan approval and negotiating terms
with the seller. Securing down payment assistance adds another layer to
the ! process.

Recipients typically must first complete a seminar on home buying, for instance.

Down-payment assistance is usually given in the form of a forgivable
loan, not as cash outright. That means that the home buyer must live in
the home for a certain period before the total loan doesn’t have to be
repaid. If they move in that time, they must pay a pro-rated portion
back. There may be restrictions on refinancing and taking cash out of
the value of the home without paying back the forgivable loan.

Some groups also offer interest-free loans that must be repaid. Barbara
de Nekker, who bought a condo in Beach Park, doesn’t think she would
have made the purchase without an interest-free loan offered through
the Affordable Housing Corp. of Lake County and a forgivable loan
secured through a bank she was referred to by Affordable Housing.

Some entities administer several down-payment assistance programs. The
Chicago Department of Housing, for instance, has programs aimed at
different groups, such as buyers of newly constructed homes in certain
neighborhoods or historic bungalows. See

Here is a sampling of a few of the down-payment assistance programs in the area:

  • The Neighborhood Lending Program, co-sponsored by the City of
    Chicago, 25 lending companies and Neighborhood Housing Services of
    Chicago, will provide up to $3,000 in a forgivable loan to match a
    borrower’s down payment funds. Up to $4,000 may be available for
    closing costs for eligible buyers in the city. More information is
    available at and from the city housing department,

  • The Chicago Federal Home Loan Bank’s Downpayment Plus Program
    provides up to $5,000 in a forgivable loan to eligible buyers in
    Illinois and Wisconsin. Downpayment Plus money can be accessed through
    Chicago Federal Home Loan Bank (FHLB) member financial institutions
    participating in the program. Information on the program is available
    at or on the Web sites of the program
    administrators, the Illinois League of Financial Institutions
    ( and Wisconsin Partnership for Housing Development

  • The Cook County American Dream Down Payment Initiative provides
    forgivable loans up to 6 percent of the purchase price, not to exceed
    $10,000, to eligible buyers in certain suburban Cook County areas. To
    find out more on the rules of the program, call the county at
    312-603-1000 for an American Dream Down Payment brochure.

  • The Corporation for Affordable Homes of McHenry County has a
    “First-Time Homebuyer” program that provides up to $7,000 in a
    forgivable loan to eligible borrowers. Those eligible must contribute
    at least $1,000 of their own funds to the down payment. Call
    815-206-5805 for information.
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