Chicago area’s 1st-time homebuyers could get grant from Freddie Mac, Rocket Mortgage
Chicago-area residents looking to buy their first home will now have access to a new down payment assistance credit courtesy of a partnership between mortgage finance company Freddie Mac and mortgage lender Rocket Mortgage.
Freddie Mac launched a program called BorrowSmart Access early this month, allowing some first-time homebuyers in 10 metropolitan areas — including Chicago — to receive a $3,000 grant toward a down payment on a single home or two-flat if they receive loans from Rocket Mortgage, the country’s biggest lender. Freddie Mac, one of the housing market’s primary financers of mortgage loans, is trying to partner with other mortgage lenders soon, according to the company.
The program is aimed at increasing the number of first-time homebuyers in Black and Latino communities, two groups that have historically faced barriers getting into the housing market due to racial discrimination. Chicago-area residents can qualify if they make no more than 140% of the area median income, have a credit score of 620 or higher and go through a one-on-one financial counseling session organized by Freddie Mac, according to Rocket Mortgage. The area median income limit would be $145,880 for a family of four, according to the Chicago Department of Housing’s calculations as of April 2022.
“The idea behind programs like these is that we want to help people in areas that might be traditionally considered underserved markets,” said Bill Banfield, executive vice president of capital markets at Rocket Mortgage. “Which really means there is a high percentage of people who are ready to buy a home and are likely of color that we want to help step up to homeownership and then the wealth ladder to build generational wealth.”
So far, 15% of all applicants for the program have come from the Chicago region, a sign to Banfield that the program is having a positive effect on the community, even in its early stages.
Chicago was one of the 10 metro areas chosen due to its high concentration of Black and Latino potential buyers who could meet the program’s qualifications, as well as the region’s higher-than-national-average levels of available housing stock, said Danny Gardner, a senior vice president of community engagement at Freddie Mac.
In the Chicago area, Gardner shared that there are about 1.2 million “mortgage ready consumers” at or below age 45, about 100,000 of which are Black families and 300,000 of which are Latino families.
“We believe it is an opportune market to try to promote the opportunity of homeownership and provide some assistance to what we know to be the biggest challenge for new homebuyers, which are funds for down payment and closing costs,” Gardner said. He added that these costs have been exacerbated by high levels of inflation and surging home price and rent growth over the last few years.
The $3,000 down-payment-assistance credit is meant to serve as one piece of a larger puzzle of financial assistance sources offered by lenders and mortgage financers to first-time buyers, Gardner said.
Rocket Mortgage in December launched Purchase Plus, another program aimed at helping first-time homebuyers in six cities, including Chicago, by offering up to $7,500 to use toward mortgage costs. Local mortgage lenders such as Neighborhood Housing Services of Chicago and the Illinois Housing Development Authority have similar grants for first-time homebuyers.
As of last year, the Chicago region has one of the largest racial gaps in homeownership among the country’s largest metropolitan areas, with homeownership rates hovering around 72% for white households, 53% for Latino households and 40% for Black households, according to the Metropolitan Planning Council.
People looking to buy homes now can afford much less and have fewer options because of higher mortgage rates and home prices and lower levels of inventory.
Nationally, in 2022, 26% of homebuyers were first-time purchasers, the lowest share since the National Association of Realtors began collecting data in 1981.
Because of this challenging housing market, Naja Morris, a real estate broker with @properties/Christie’s International Real Estate who has clients in the target market for Freddie Mac’s new program, says the program could offer more support.
“I am always happy when a program comes out that is targeting underserved communities, but it often feels as if it’s not enough,” Morris said. “It seems like every year there is a recalibration of what underserved communities need and a new program that essentially is doing the same thing as the previous program, and typically, the dollar amounts are not extremely substantial.”
Morris may be right that the program might not stick around.
“I do think that these programs will … be modified and that could mean they could end,” Banfield from Rocket Mortgage said. “There is a bit of a sense of urgency. If somebody is looking to buy a home, I would look to take advantage of this now.”
Editor’s note: This story has been updated to reflect that the program’s income limit is 140% of the area median income.
