Mortgage Guide

How to get a home loan

What is IHDA’s minimum down payment requirement on a mortgage?

Before many home buyers begin searching for a house, they get caught up in how much money they need for a down payment. Since not everyone has a large amount of cash put away, they look to organizations like IHDA (Illinois Housing Development Authority) for down payment assistance on their home.

In this article, I’ll explain the basics of a down payment on a home loan and what’s the minimum down payment on a mortgage for IHDA.


What’s a down payment on a home?

This is the borrower’s “skin in the game” money that is usually held in a savings or checking account. However, the down payment can come from other areas such as the sale of a home. Either way, the cash is sourced and tracked by showing the funds are real by providing the last two months of bank statements.


What’s the range of the down payment?

Typically, down payments range from 3%, 3.5%, 5%, and up to 20%. There are exceptions such as VA and USDA with 0% down payment.


Why do I always hear about putting “20% down on a home?”

Many people think you have to put 20% down on your home, which is not true. Home buyers make this their goal, because when you put less than 20% down, you have to pay for private mortgage insurance. For example, a buyer may put $30,000 down on a $150,000 home (20%). The buyer won’t pay for mortgage insurance, but they now are risking $30,000 in the event they cannot make the loan payment and the home will go into foreclosure. Since the borrower made a big down payment, they are incentivized to make the mortgage payments.

However, some home buyers aren’t fortunate enough to have $30,000 in the bank. Is there a solution?

Yes - and you have plenty of options. One is by checking out the Illinois Housing Development Authority (IHDA) for down payment assistance.


What’s IHDA’s minimum down payment requirement?

The greater of 1% or $1,000 of the purchase price. For example:

$150,000 (purchase price) x .01 = $1,500

Let’s take the same example we used earlier if the borrower wanted to be an IHDA qualified borrower. They could put $1,500 as the down payment, which is more than the minimum $1,000.

Some home buyers don’t have a choice when it comes to bigger down payments. This is okay as at least you own your own home and you’re not paying rent. Here are possible advantages of making a small down payment on a home loan:

  • There is a good chance your home will increase in value, so you’re building equity.

  • Your interest rate is locked in for up to 30 years.

  • You have the ability to purchase sooner and not wait to build large cash reserves.

  • You get to fire your landlord and future rent increases.

  • You’ll have the freedom and peace of mind to make renovations without reporting to the landlord.


Just like a warning on the physician prescribed medicine bottle, there are some side effects to making a smaller down payment.

By putting less money down, the lender takes on more risk. As we explained earlier, borrowers are required to pay for mortgage insurance to cover the gap. However, this can be removed once the borrower’s equity in the property increases to 20% and then the mortgage insurance can be removed.

For more information on down payment, check out our article about how the 20% down payment on your home is a myth.


Key Takeaways:

  1. With IHDA’s low down payment assistance programs, qualified borrowers can put as little as $1,000 down payment

  2. Once you’ve built 20% equity, you can cancel your mortgage insurance payment which will lower your monthly mortgage bill

Lower down payment provides a path to homeownership sooner. Call me at 314-474-0961 to see if you’re qualified as other rules apply. And if you want to learn more about how the home buying process works with IHDA, download the eBook below.


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