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Downpayment Plus® Consumer FAQ
1. What is the Downpayment
Plus® Program?
2. Who is eligible to receive a Downpayment Plus
grant?
3. What Illinois lending institutions are
participating?
4. What is the maximum grant amount that may be
awarded to eligible borrowers?
5. How does a borrower obtain a grant?
6. What are the eligible and ineligible uses of
grant funds?
7. Can the homebuyer receive cash back at closing?
8. How is household income determined?
9. What types of properties are eligible?
10. Are there limitations on the type of first
mortgage?
11. How is household size determined?
12. What are the lender requirements for home buyer
counseling?
13. Under what circumstances can counseling costs
be paid by the Downpayment Plus grant?
14. Can a mortgage securing the promissory
note/repayment agreement for a Downpayment Plus-funded grant be
subordinated to a home equity loan at a later date?
15. What is the applicable retention period for the
grant?
16. What happens to the junior mortgage if the
borrower refinances the first mortgage?
17. Under what circumstances must the grant be
repaid?
18. How is the grant amount to be repaid
calculated?
Downpayment Plus® Program
Questions & Answers
1. What is the Downpayment Plus® Program ?
The
Downpayment Plus program is a down payment and closing cost
assistance program for low and moderate income home buyers, funded
as a set-aside through the Affordable Housing Program (AHP) of the
Federal Home Loan Bank of Chicago (FHLB).
Funds are available
to all FHLB of Chicago member financial institutions in Illinois and
Wisconsin including member subsidiaries and affiliates. The assistance provided is in the form of a grant paid on
behalf of the borrower at the time the borrower closes on mortgage
financing with a participating member financial institution.
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2. Who is eligible to receive a Downpayment
Plus grant?
The program is available to homebuyers with a combined annual
household income at or below 80% of the median household income of
the area where the property is located, adjusted for family size. To
see if you may qualify, please use our
"Do
You Qualify" web tool..
The borrower must contribute $750 toward
the purchase of the home. The purchaser(s) must complete a homebuyer
or homeowner counseling program prior to receiving grant funds, and
sign a certificate of eligibility that certifies their income.
ITIN holders who have filed Federal Income Tax returns for at
least the two preceding years, who are able to document consistent
earning, and who have met the borrower requirements listed above,
are eligible to receive assistance from the DPP program. Providing
DPP assistance to ITIN holders is at each member's discretion. ITIN
holders whose income is used to qualify the household for the first
mortgage financing must meet the above ITIN requirements.
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3. What Illinois lending institutions are
participating?
For a list of Illinois institutions that are participating in the
program, go to the List of
Illinois Participating Financial Institutions.
4. What is the maximum grant amount that may
be awarded to eligible borrowers?
The maximum grant is $4,000 per property. The Downpayment Plus grant may not
be used with other AHP subsidies for downpayment, closing cost
assistance or homeownership counseling costs for the same borrower
in the same transaction.
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5. How does a borrower obtain a grant?
The Borrower:
 | Contacts an Illinois Participating Financial Institution; |
| Applies for first mortgage financing with a participating
member financial institution; |
| Provides an executed purchase contract for the property,
evidence of income eligibility, completes pre-purchase homebuyer counseling, and makes
the required $750 equity contribution. |
The Member DPP® Participating Institution:
| Determines that the borrower is income-qualified for a grant; |
| Makes a grant reservation with the Illinois League of
Financial Institutions approximately 90 days prior to the loan
closing; |
| Ensures that the borrower successfully completes an approved
homebuyer counseling program; |
| Ensures the borrower makes their required $750 equity
contribution |
| Ensures that the entire grant is used for eligible purposes
and cash back to the borrower at closing does not exceed $250 |
| Disburses the grant funds at closing when the first mortgage
funds are disbursed; |
| Ensures the home is subject to a legally enforceable deed
restriction meeting Downpayment Plus requirements; |
| Forwards required documentation to the program administrator. |
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6. What are the eligible and ineligible uses
of grant funds?
Eligible Uses:
| Downpayment assistance |
| Closing Costs |
| Costs required by lender to be paid in advance; items must be
detailed on the Settlement Statement |
| Escrow Reserves deposited with the lender |
| Rehabilitation costs directly associated with acquisition |
| Homeownership counseling costs if they meet eligibility
requirements (see Question 13) |
Ineligible Uses:
| More than $250 cash back to the homebuyer at closing
(see Question 7) |
| Reimbursement of earnest money or deposits (in excess of the
above mentioned $250 cash back) |
| Pre-paid life insurance |
| Use with any other AHP subsidy for the same borrower in the
same transaction |
| Payment of member required $150 loan closing fee |
| Fees for homebuyer counseling provided by the FHLBC member
institution |
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7. Can the homebuyer receive cash back at
closing?
A homebuyer can receive up to $250 cash back at loan closing. Any
cash back received by the homebuyer will be deducted from their
equity contribution total in determining whether the $750
contribution has been met. Example: If a homebuyer receives $250
cash back at closing, their initial equity contribution must be at
least $1,000 in order to meet the $750 homebuyer equity requirement.
If the $750 equity requirement has not been met, the grant will not
be reimbursed.
A member may use any DPP subsidy exceeding such an amount that is
beyond what is needed at closing for closing costs and the approved
mortgage amount as a credit to reduce the principal of the mortgage
loan or as a credit toward the household's monthly payments on the
mortgage loan. The grant amount will be reduced by any ineligible
cash to the borrower at closing.
8. How is household income determined?
Income eligibility is based on the household's total annual income
for the current year. The income of each household member age
18 years and older is included in the household's total income.
The income calculated must include all year to date earned income,
plus potential income for the remainder of the year. The FHLB
of Chicago no longer accepts household income as determined by its
members' underwriting standards. Please contact the
administrator for further details.
9. What types of properties are eligible?
Owner-occupied one- or two-unit properties are eligible for grants.
The property must be the borrower/grant recipient's primary
residence. If a property is not located in Illinois, it must be in
the primary service area of the participating member. The property
can be attached, detached or condominium.
Mobile homes and property sold on land contract are also
eligible. A mortgage lender who offers mortgage financing for the
purchase of a mobile home may include a Downpayment Plus grant
provided the mobile home is located on property that is either owned
by the household, or for which the household has a lease or rental
agreement for a minimum of one year. Grant funds may also be used to
assist borrowers who convert a land contract for deed to a regular
mortgage loan.
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10. Are there limitations on the type of first
mortgage?
| Home purchases financed with interest-only first mortgages are
not eligible for DPP assistance. |
| Lenders may use a wide range of mortgage programs, including
conventional fixed or adjustable rate, HUD Section 184, FHA*, VA,
or IHDA and WHEDA, provided the loan term is a minimum of 5 years.
On adjustable rate mortgages, the initial interest rate lock
period must be a minimum of 5 years.
*Homes with FHA mortgages require a special retention agreement;
FHLBC must hold the lien, and the member is required to service
the lien. |
| The rate of interest, points, fees, and any other charges for
all loans made in conjunction with the DPP subsidy shall not
exceed a reasonable market rate of interest, points, fees, and
other charges for loans of similar maturity, terms, and risk. |
| The grant can be combined with other federal, state and local
grants or loans, such as CDBG funds. |
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11. How is household size determined?
Household size is based upon the number of people who will reside in
the home being purchased. Divorced or separated borrowers who have
joint custody of their children should include the children in their
household count, even though the children may only live in the
household on a part-time basis. Borrowers who do not have custody
should not include the children in their household count. Full-time
students who are not considered dependents and are not living at
home while attending school should be included in the borrower's
household count.
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12. What are the lender requirements for
homebuyer counseling?
The lender is required to certify that the borrower has completed a
homebuyer counseling program provided by, or based on one provided
by, an organization recognized as experienced in homebuyer or
homeowner counseling and as approved by the administrator of the
program. Counseling must provide comprehensive financial literacy
education, including information that alerts borrowers to potential
predatory lending practices. The organization may be your bank or may be an outside
party. If your bank provides the counseling, a fee cannot be charged
for this service. (Visit
the HUD web site for a list of HUD approved counselors. )
13. Under what circumstances can counseling
costs be paid by the Downpayment Plus Grant?
Counseling costs may be paid with the Downpayment Plus grant if:
| The costs are incurred in connection with counseling provided
by an organization other than the participating institution (your
bank) to homebuyers who actually purchase a DPP-assisted unit; and |
| The cost has not been covered by another funding source,
including the participating institution; and |
| The cost to be covered by the DPP®
subsidy does not exceed $600
per household; and |
| The cost is identified on the Settlement Statement (HUD-1). |
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14. Can a mortgage securing the promissory
note/repayment agreement for a Downpayment Plus-funded grant be
subordinated to a home equity loan at a later date?
A mortgage used to secure the promissory note/repayment agreement
for a downpayment plus-funded grant can be subordinated to a home
equity loan.
15. What is the applicable retention period
for the grant?
Grants are subject to a 60-month retention agreement to ensure that
the property is retained as affordable housing. The retention period
commences on the date the loan is closed. If the grant recipient
owns and occupies the home as their primary residence for the full
term, the grant is totally forgiven at the conclusion of the
retention period.
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16. What happens to the junior mortgage if
the borrower refinances the first mortgage?
The lender has a number of options and can choose one of the
following:
| Agree to subordinate the junior mortgage that secures the DPP
grant to the refinanced first mortgage. No amount
would have to be repaid. |
| Transfer the retention agreements to the new lender on the
same terms and timetable. The new lender must be a member of the FHLB
of Chicago and execute a DPP Program Agreement with the FHLB of
Chicago to ensure repayment. No amount would have to be
repaid. |
| Collect the unforgiven portion of the grant when the new
loan is closed if neither of the first two options is chosen. |
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17. Under what circumstances must the grant
be repaid?
The borrower must repay a pro-rata portion of the grant in any of the following circumstances:
| The borrower sells the property prior to the end of the
retention period to a non income-eligible purchaser, and realizes
a net gain on the sale. Repayment is waived if the borrower
realizes no net gain on the sale. |
| The mortgage is refinanced and the retention
agreement no longer applies to the property. |
| The borrower is no longer using the property as a primary
residence. |
The FHLB of Chicago must be given notice of any sale, refinancing,
foreclosure or change in owner-occupied status occurring prior to
the end of the retention period. In the case of a foreclosure, the
obligation to repay any subsidy is terminated after foreclosure.
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18. How is the grant amount to be repaid
calculated?
The DPP grant is forgiven on a pro rata basis over a 60 month
period. Forgiveness of the grant is based on the number of full
months the owner occupied the property as their primary residence. A
month is calculated from the exact date of the loan closing to
the corresponding date one month later. No forgiveness will be
recognized for partial months.
In the case of a sale, a pro rata share of the DPP grant shall be repaid to the FHLBC from any net gain realized upon
the sale of the unit.
In the case of a refinancing, a pro rata share of the grant shall
be repaid to the FHLBC unless the unit continues to be subject to a
legally enforceable retention agreement.
In the case of a foreclosure, the obligation to repay any subsidy
is terminated after foreclosure.
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"Downpayment Plus", "DPP", "Downpayment Plus Advantage", "DPP Advantage"
and "MPF" are registered trademarks of
the Federal Home Loan Bank of Chicago.
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