Peter Maloney wanted to return from Florida to the Chicago area, but with $ 44,000 in student loans to pay off, he figured it would take several years before he could buy a house.
Maloney, 26, considered moving to Indiana, where he would be close to his family and homes are cheaper. But he and his fiancee were sold to Illinois after hearing about a state program that helps homebuyers pay off student loans and provides down payment assistance.
In June, Maloney will close the purchase of a two-bedroom, two-bathroom condominium in Plainfield, Illinois. “It definitely made the decision (to move) easier and buying a home possible,” he said.
The SmartBuy program, offered by the Illinois Housing Development Authority, has also attracted interest from other out-of-state buyers, said executive director Kristin Faust.
The agency hopes the program, which began in December, will help remove a financial barrier to homeownership and make access more equitable.
The program will repay up to $ 40,000 in student loans, or a loan amount equal to 15% of the purchase price of the home, whichever is less. It will also provide a loan of $ 5,000 for a down payment or closing costs.
The state has allocated up to $ 25 million for the program in Governor JB Pritzker’s 2019 Rebuild Illinois capital plan. The money is expected to go to 600 to 1,000 home buyers.
To date, the agency has paid off an average of $ 24,100 in student loan debt for each buyer.
Potential buyers in the Chicago area must have a family income of no more than $ 109,200 to be eligible. The limit on the purchase price of a home is between $ 325,000 and over $ 500,000, depending on the location and type of home.
The program comes with other caveats. All of a buyer’s unpaid student loan debt must be paid off when the home is purchased. The home must be the buyer’s primary residence, and if they sell within three years, they must repay some of the student loan assistance and sell to someone who meets the income requirements of the program. The sale price cannot exceed the limits of the program.
Buyers can apply for the program through any of the three dozen lenders who have partnered with the state. The Illinois Housing Development Authority sets the interest rate on the mortgage.
Nearly 200 buyers entered the SmartBuy process between December 1 and the end of March, and 26 have completed their purchases, according to the agency. About 10 of those who entered the process were from outside Illinois.
“I get a lot of interest,” said Chanon Slaughter, vice president of guaranteed rate mortgages. “I get people literally saying, ‘I want to go back to Chicago for this program. “”
According to a 2017 study by the National Association of Realtors, student loans delay first-time home buyers by about seven years and current homeowners from buying their next home by about three years.
Delays could accumulate in Illinois. More than 2 million residents have student loan debt, with an average balance of nearly $ 30,000, according to the state treasurer’s office.
Owning a home is a critical way to build wealth and pass it on from generation to generation, so delays in buying a home spill over to the economy and households, said Faust.
“I think as a society we said if you go to college and do well and you graduate and get a job you should be able to buy a house,” he said. she declared. “And then, instead, we loaded this generation with a lot of student debt. “
The US Department of Education has announced a variety of student loan relief programs during the COVID-19 pandemic. But for some Illinois buyers, a more immediate way to pay off student loans was too good to be overlooked.
Mo Hoelker, 33, did not want to depend on government bureaucracy for loan relief when an option was readily available, she said. She and her husband, Sam, moved out of their Chicago apartment and bought their first home under the program in February, a three-bedroom, two-bathroom home in Mount Prospect, Illinois.
She wondered if she could have gotten a lower rate if they hadn’t used SmartBuy. But she decided that paying off about $ 18,000 in student loans outweighed those potential costs over the course of about a decade.
The hundreds of dollars she used to pay in student loans each month helps her pay off her mortgage, which made her more comfortable committing to a large payment, he said. she declared.
“I think at the end of the day what I gained from using this program is really financial peace of mind,” she said.
Wintrust Mortgage, one of 34 Chicago-area lenders working with the state on the program, has prequalified several people from other states, primarily Indiana and Wisconsin, said Jason Accola, senior loan consultant. mortgage. Maloney, who is returning to the area from Florida, is his only out-of-state client under contract.
Approximately $ 33,000 of Maloney’s $ 44,000 student loans will be repaid under the SmartBuy program. Maloney will pay off the remainder of this debt.
That means the roughly $ 400 a month he would pay under a standard loan repayment plan can now go to his mortgage, he said.
Without the program, he estimated it would have taken him another five years to buy a home.
“It made a huge difference to be able to buy something in a neighborhood where we would like to live and to have a little space,” he said.