Mortgage

Illinois pays out pupil loans to advertise residence possession

Peter Maloney wanted to return to the Chicago area from Florida, but with $ 44,000 in student loans to repay, he reckoned it would be a few years before he could buy a home.

Maloney, 26, was considering moving to Indiana, where he would be close to his family and homes are cheaper. But he and his fiancée were sold in Illinois after learning of a state program to help homebuyers repay student loans and assist with down payment.

In June, Maloney will complete the purchase of a two bedroom, two bath condominium in Plainfield. "It definitely made the decision (move) easier and made buying a home possible," he said.

The SmartBuy program, offered by the Illinois Housing Development Authority, has also attracted the interest of other buyers outside of the state, said executive director Kristin Faust.

The agency hopes the program, which began in December, will help remove a financial barrier to home ownership and make access more equitable.

The program pays out up to $ 40,000 in student loans or a loan amount equal to 15% of the home purchase price, whichever is lower. A $ 5,000 loan is also provided for a down payment or closing expenses.

The state allocated up to $ 25 million to the program in Governor J. B. Pritzker's 2019 Capital Plan for the Reconstruction of Illinois. The money is expected to serve between 600 and 1,000 homebuyers.

To date, the agency has repaid an average of $ 24,100 in student loan debt for each buyer.

Prospective buyers in the Chicago area must have a household income of no more than $ 109,200 to be eligible. The home purchase price limit is between $ 325,000 and more than $ 500,000, depending on the location and type of home.

There are other restrictions in the program. A buyer's full outstanding student debt must be paid back during the home purchase. The house must be the main residence of the buyer. If he sells within three years, he will have to repay a portion of the student loan support and sell it to someone who meets the income requirements of the program. The sales price may not exceed the program limits.

Buyers can apply for the program through any of about three dozen lenders that have partnered with the state. The Illinois Housing Development Authority sets the interest rate on the mortgage.

Almost 200 shoppers took part in the SmartBuy process between December 1 and the end of March, and 26 had completed purchases, according to the agency. About 10 of those who entered the process were from outside of Illinois.

"I'm getting a lot of interest," said Chanon Slaughter, vice president of guaranteed rate mortgage lending. "I get people who literally say, 'I want to go back to Chicago for this program.'"

According to a 2017 study by the National Association of Realtors, student loans delay home buying by about seven years and current owners delaying buying their next home by about three years.

The delays could add up in Illinois. More than 2 million residents have student loan debt averaging nearly $ 30,000, according to the treasurer's office.

Owning a home is an important way of building wealth and passing it on from one generation to the next. So delays in buying a home have an impact on the economy and individual households, said Faust.

"I think as a society we said that if you go to college and do well and graduate and get a job, you should be able to buy a house," she said. "And instead, we've left this generation with a lot of student debt."

The U.S. Department of Education announced various student loan assistance programs during the COVID-19 pandemic. But for some Illinois shoppers, an instant student loan repayment route was too good to pass up.

Mo Hoelker, 33, did not want to rely on government bureaucracy to issue loans when an option was available, she said. She and husband Sam left their Avondale apartment and bought their first home, a three-bedroom, two-bathroom home in Mount Prospect in February through the program.

She wondered if she could have got a lower rate if they hadn't used SmartBuy. However, she decided that paying back about $ 18,000 on student loans outweighed these potential costs over the course of about a decade.

The hundreds of dollars she spent on student loans each month help pay off her mortgage, which made it easier for her to commit to one large payment, she said.

"I think at the end of the day I really got financial security from using this program," she said.

Wintrust Mortgage, one of 34 Chicago area lenders working with the state on the program, has pre-qualified several people from other states, mostly from Indiana and Wisconsin, said Jason Accola, a senior mortgage advisor. Maloney, who is returning to the area from Florida, is his only customer outside of the state under contract.

Approximately $ 33,000 of Maloney's $ 44,000 student loan is being repaid through the SmartBuy program. Maloney will pay off the rest of that debt.

That means the roughly $ 400 per month he'd pay on loan under a standard loan amortization plan can now be used on his mortgage, he said.

"Without the program, it would have been an estimated five years before he bought a home.

"It made a huge difference to be able to buy something in an area we want to live in and have some space," he said.

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