This is the story of how my client successfully used the IHDA (Illinois Housing Development Authority) SmartBuy Program to buy a Chicago home and pay off his student loans.
Four months ago, I was contacted by an out-of-state friend who asked if I could help his oldest son buy his first home.
My friend had just heard about the new State of Illinois program called SmartBuy. The program would allow his son to pay off all of his student loans.
Help a friend buy a place AND get his student loans paid off? Count me in!
I reached out to Lisa Anderson at Compass Mortgage, my friends preferred mortgage provider, and asked her about the new state program. She explained that SmartBuy was brand new, and that our transaction would probably be one of the first thirty closed.
Here’s what SmartBuy provides:
SmartBuy will pay 15% of the value of the purchase, up to $40,000, to help a buyer pay off their student loan debt, and the amount must pay off ALL of the buyer’s student loans. SmartBuy also provides $5,000 for down payment assistance.
- A 640 credit score, and a debt-to-income ratio cannot exceed 45%.
- New owners must live in the home for three years.
- It can take about sixty days to get the mortgage commitment.
Sixty days to get the mortgage commitment in a highly competitive market at a price point with already low inventory seemed impossible. I knew that we could never win a multiple offer situation with a sixty day mortgage contingency!
My client adjusted his search criteria, we found a suitable home and made an offer.
Before the offer was submitted, I called the listing broker and gave a detailed explanation of why we were asking for sixty days. The listing broker said his client would understand the need for the long term, and the submitted offer was accepted. We committed to a transparent process and open line of communication through the entire process.
Essentially, the mortgage application goes through two underwriting processes.
The first with the mortgage company, and the second with the IHDA. One of the interesting conditions placed on my client’s application was that he have more money in savings. That really seemed counterintuitive – if this recent graduate had that money in savings, wouldn’t he use it to help pay off his student debt?
Even AFTER the sixty days, we needed an additional week to get the final clear to close. There were daily status emails to both sides about where the mortgage stood, and we ultimately received the clear-to-close.
Closing with SmartBuy.
I attended the closing with my client (strictly there for moral support because his parents were out-of state).
I can report that the seller’s attorney and title company closer were not familiar with SmartBuy, questioning where in the settlement statement to account for a debit and credit to pay off the student loans. They didn’t know where the wire amount was coming from.
As we were waiting for the last wire, I asked the attorney and closer about their view on the SmartBuy program. Both loved the program and supported its intent, but commented that state offered no guidance on how to handle the details. Fair comment, and after four and a half hours, the deal closed. Lessons learned on this deal would easily be applied to the next one.
A happy new Chicago home owner!
Home ownership builds community involvement through the economic demand for goods and services near the residence. More importantly, home ownership help builds wealth and improves the financial profile of buyers.
My client emailed a photo to me the day after closing with his dual computer monitors and laptop set on a folding table and folding chair in an otherwise empty room. HIS home office in HIS new home!
For more information about the SmartBuy program, contact Best Chicago Properties Broker Associate Doug Stachowiak.