Below is a FAQ session I did with veteran mortgage expert, Chanon Slaughter, about the state of Illinois's SmartBuy Program.
Under this program, homebuyers can get up to $40 thousand of their federal and private student loan debt paid off.
Chanon is the VP of Mortgage Lending with Guaranteed Rate.
Stanley Tate (01:03):
Hey, what's going on y'all? This is Stanley Tate, your student loan lawyer, and today I'm back with Chanon Slaughter here who is a veteran mortgage banker. He has damn near two decades' worth of experience in this field. I wanted to bring him all because right now, Illinois is offering homebuyer's what's called the SmartBuy Program, which is granting up to $40,000 in student loan payments, like covering forgiveness for people to go ahead and get into homes, and it's like this crazy program.
Stanley Tate (01:33):
So I got connected to Chanon, and I just wanted to bring him on and just ask him a bunch of questions so you can get the information you guys need to go ahead and get a home. Because that's the huge thing, right? You all say, "Oh, I can't buy a home because of my student loans." And as we told you in the last video where we talked with another mortgage banker, that's simply not true. We just need to find ways to leverage the rules to put you in the best position possible to increase home purchase accessibility. So I'm glad Chanon went ahead and agreed to do this call with me.
Stanley Tate (02:00):
Chanon, did I do a good job of kind of breaking down your experience there, bro?
Chanon Slaughter (02:04):
You did. You did. I appreciate it. Yes, sir. I've been in the business since '02, all facets real estate agent. When I first started, a loan officer, I went inside, process and underwriting. But, ultimately, I like being outside helping folks. So yes, sir, you did a great job.
What is the SmartBuy Program
Stanley Tate (02:21):
Awesome. Cool. Well, let's just get right into it. So tell me, what is this SmartBuy Program?
Chanon Slaughter (02:28):
SmartBuy is the most awesome program I've seen hit this market, man, in a long time. It's through IHDA. (visit ihdamortgage.org) It is a debt forgiveness program, student loan debt forgiveness program. They will give you 15% of the purchase price up to $40,000 to pay off your student loans, help you qualify for a mortgage. You also would even get down payment assistance of 5,000 on top of it. Very nice program, owner occupied purchase, must live in the state of Illinois, but awesome, awesome program.
Stanley Tate (03:07):
All right. Now you said like must live in the state of Illinois. So could I relocate to Illinois and take advantage of this program?
Chanon Slaughter (03:13):
You can. It's an owner occupied. As long as you're going to live in the home. You just have to buy in Illinois. I guess I should be more specific. You have to buy in Illinois and you do have to live in there property.
Stanley Tate (03:36):
How long do you have to live in a property for before you could sell or move somewhere else?
Chanon Slaughter (03:46):
The program requires, for the forgiveness for you to be in the home three years. After three years, the... Can you hear me? I'm sorry.
Stanley Tate (03:56):
I can hear you, definitely.
Chanon Slaughter (03:58):
Oh, okay. I'm sorry. After three years, then that debt is fully forgiven. It is pro-rated. They take 1/36th and forgive a portion of the money that they've paid for your student loans. And so after three years, at that point in time, you can refinance, sell, do whatever it is you want to do.
Stanley Tate (04:21):
All right. I think I got it. Up to the $40,000 that they're going to pay off, they're doing that at closing, but then they make it a forgivable loan by you staying in there for that three-year period and after-
Chanon Slaughter (04:33):
Stanley Tate (04:34):
Chanon Slaughter (04:35):
So what it is, it's actually not a loan. It's they put a deed restriction on the property. You can only sell to a borrower who is under the IHDA income limits in those first three years. Now, and I should've said you can jump up and move in the home, sell the house a year later. You're just going to owe that portion of whatever they've paid back. So nothing to say that you cannot leave, but like I said, you will owe portion if you leave in those first three years.
Stanley Tate (05:10):
Okay. Now, we're using this acronym, IHDA. What is IHDA?
Chanon Slaughter (05:17):
Oh, I'm sorry. Yeah. That's Illinois Housing Development Association, and it's one of the state agencies that provides financial... They provide all... It's not just first-time home buyers. There's relief for current home owners, but it's an excellent program. Most states and local governments have similar programs. I don't know if they have the SmartBuy. I think the state of Illinois is the first one to do the SmartBuy, but most states do have a state agency that provides funds to help homeowners.
Stanley Tate (05:52):
Okay, got it. You said something about first-time home buyer. So with this particular SmartBuy Program, do you have to be a first-time home buyer?
Chanon Slaughter (06:02):
You don't. With any IHDA purchasing program, as long as you haven't purchased a home in the last three years, you're considered a first-time home buyer at that point in time. You can own a home. It's just as long as you haven't purchased it in the last three years.
Stanley Tate (06:17):
Okay. Got it. So there is a home buying eligibility requirement. You can't have purchased a home in the last three years. Other than that, you're good to go for this program?
Chanon Slaughter (06:27):
Other than that, you're good to go as long as you meet all the other criteria. IHDA programs, which it's not the major. I mean, it's a conventional loan. Fannie Mae conventional loan right now is approved to do it. IHDA requires a 640 credit score for their programs. But again, this being a conventional loan, scores are one thing. You have to have a decent history the last couple of years for the conventional Fannies DU automated underwriting system to approve you. No manual underwrites for this program, so you literally have to be approved through the system. When you apply before you get that pre-approval letter, that's something I'm going to run you through, and any other mortgage lenders should run you through that automated underwriting to tell you yes or no.
Stanley Tate (07:12):
Okay. I'm going to come back to that, just the underwriting and credit process. I want to set that aside, if that's okay. And I want to go back to focusing on what type of student loan debt is going to be forgiven. Does this apply to both federal student loans and private student loans or just one or the other?
SmartBuy mortgage forgives federal and private student loan debt
Chanon Slaughter (07:30):
To both. To both. It applies to all of them. That is kind of the one caveat with the program. You have to pay all your student loan debt at closing. So if you owe 50, and the purchase price typically to get the $40,000, your purchase price has to be right around $266,000. And then, so if you owe 50, they're going to pay 40 at closing, you have to bring the other $10,000 to closing.
Stanley Tate (07:56):
Chanon Slaughter (07:56):
So that is the one key to the program that everything, all your student loans have to be paid at closing.
Stanley Tate (08:02):
Okay. So all of your student loans that are shown on your credit report need to be paid at closing, right?
Chanon Slaughter (08:07):
Correct. You were specific when you say shown on your credit report.
Stanley Tate (08:13):
Right, because I have some borrowers who are going to have private student loan debt and credit card debt that no longer lists on their credit report. They may have borrowed the loans before, but they're not sure if it's been charged off or what have you, statute limitations, whatever have you. So I'm asking like how are we knowing what student loan debt needs to be paid off?
Chanon Slaughter (08:33):
Yes. Typically, it is going to be the credit report, but you know us lenders, we have other ways to know what else is out there, and so it's any student loan. It may not have hit your credit report, but nine times out of 10, we're going to see it. We're going to know, and it has to be paid.
Stanley Tate (08:50):
Yeah. That was one of the things that we talked a lot about because I'll have borrowers who they have defaulted on federal student loans that have fallen off their credit report, but they're still on the CAIVRS system. And they find out towards closing, "Oh, I have this other loan sitting out there." Now, there's not a similar system for defaulted private student loans that may have fallen off the credit report. But there's just one other thing. So the primary area that you're going to look at to determine their student loan balance that they have is going to be from credit report. but there are other systems that are double-checked or [crosstalk 00:09:19]-
Chanon Slaughter (09:18):
Stanley Tate (09:19):
... to see what's there.
Chanon Slaughter (09:21):
No question, no question about it.
Stanley Tate (09:22):
All right. So, to be clear, if I have multiple loans that total more than $40,000, it can't just be, "Okay, they're going to pay off the 40,000 as part of closing costs." That's it. I also have to pay off all those other loans, the balance of those, at closing to be eligible?
Chanon Slaughter (09:43):
That is correct. Yep. You have to pay all the student loan debt at closing to be eligible.
Stanley Tate (09:49):
Okay. All right. With that, some may need to bring some significant cash to the table, depending on what your loan balance is. But it would seem like the ideal person, someone who is 40,000 and under in student loan debt is like perfect for this program.
Chanon Slaughter (10:05):
Yeah. Yes. Yes. We find a lot of that. I mean just, it doesn't help every one, of course. If you owe 100,000, if you've got 60,000 to the side somewhere and you want to bring it in, that's fine. But it's just a certain amount of folks it's going to help. Unfortunately, it won't help everyone, but it is definitely an option out there.
Stanley Tate (10:30):
Yeah. It makes sense though, because there's a... And you may not have saw this report that recently came out where they were talking about the $50,000 in loan forgiveness potentially being considered by President Biden. And they were doing estimates to show that if they were to grant $50,000 worth of forgiveness, that will basically take care of more than 60% of all federal student loan borrowers. So we're talking about several million people-
Chanon Slaughter (10:53):
Stanley Tate (10:54):
... are 50,000 and below. So we're still talking about a huge population that could benefit from this program.
Chanon Slaughter (11:00):
Stanley Tate (11:00):
But it may not be the best fit for people that owe significantly more than $40,000.
Chanon Slaughter (11:07):
Yes, sir. Correct. Absolutely right. Absolutely right.
Stanley Tate (11:09):
Cool. Got it. All right. The loans then, they are paid off at closing, your student loans?
Chanon Slaughter (11:18):
Yes, sir. Paid off at closing. It's gone. It's gone at that point. The state of Illinois has a deed restriction to get their money back if you up and sell the home or anything like that. But it is paid off at closing. Its no more.
SmartBuy mortgage can be used for single and two family homes
Stanley Tate (11:33):
All right. Man, that's crazy. The loan, it can be used for single family homes and multifamily, or just single family?
Chanon Slaughter (11:41):
Single family and up to a two-unit, condos, townhouses. Yes. Up to a two-unit. Yes, sir.
Stanley Tate (11:50):
So a two-unit's going to be like, I can stay there and I could rent one to someone else, but that's all I can do is the most is two-units. Right?
Chanon Slaughter (11:56):
Minimum credit score
Stanley Tate (11:57):
Got it. Okay. Let's jump over to this credit part now. So you were saying that the minimum score you're looking for here is about a 640. That's the minimum. What's like the ideal that you're looking for at a minimum, not the 640? I'm assuming there's a difference between the bare minimum versus what you're really looking for.
Chanon Slaughter (12:17):
Yes, sir. That is an excellent question. And because this is a Fannie Mae conventional loan, typically what I see, you're going to have to be in the 680 range for the system to approve you. And even when I say that, there's a whole lot of asterisks around it. I mean, because we've got a lot of good folks out here that know how to trick credit scores, a lot of different systems that tell you how to trick and increase your credit score. Well, you can't trick the automated underwriting system. It's going to analyze you. It's going to look at your credit for the last couple of years.
Chanon Slaughter (12:51):
And that's not to say you couldn't have any blemishes, but typically for the system to approve you... so just kind of, that Fannie Mae program, you can do either... The minimum down payment is 3%. All right? Most of the time, you definitely have to be in that 680-700 range for it to approve you at 3%. Typically, if you're at the 660, 670, when I'm playing with the numbers, you may be able to qualify at the 5% down. So that's going to be your loan officer's job, if maybe you don't have the strongest credit, is to just kind of structure the loan certain ways to see where it will accept you. But rule of thumb, just my experience, doesn't mean it's always, right around a 670, 680 threshold is where I can get the approval.
Stanley Tate (13:43):
Got it. I guess if I'm a consumer, I'm going to come to you with like "My Credit Karma say this score." Right? Or like "My FICO says this."
Chanon Slaughter (13:52):
Stanley Tate (13:55):
If I came to you and I told you my scores like a 720 on a Credit Karma, are you going to discount that down in your mind to kind of say, "Okay, I think your score is actually around here in our system."
Chanon Slaughter (14:06):
No question about it. Yeah. If you tell me Credit Karma says 720, I figure you're in a 680 range. [crosstalk 00:14:14]
Stanley Tate (14:15):
... dropping it down 40 points.
Chanon Slaughter (14:16):
Yeah. And I'm going to tell you. It's not always cut and dry, because I've seen Credit Karma say 580 and a person's score was 680. So it works both ways, but that is not the end all, be all what you see with Credit Karma. You do want to get with a lender and see where you are.
Recent student loan default doesn't make you ineligible
Stanley Tate (14:37):
Okay. You were talking about blemishes on a credit report. I have a lot of borrowers who have like a default on a student loan that they gotten out of default in the past year or so. Are any of those negative tradelines on a trade mark. Are those going to hold them back at all from that? Let's say they have a score that's 700, but they had a recent default in the past year or two years. Does that cause any issues?
Chanon Slaughter (15:07):
You know what? It's always a risk assessment. So when the system is analyzing you, depending on how long ago that default was. If it was last year, even if your scores are 680, it's very well possible the automated underwriting system is not going to accept you. But, like I said, it's kind of a risk. If you had these blemishes, your scores are higher, then yes, it'll probably accept you. But if you just recently, like literally last month or last year, and you got everything corrected, and you came to me now, nine times out of 10, it's going to say no. So it's just time heals all wounds. So it's not to say if you've had these blemishes, that's it. But the further out from that blemish, the stronger your credit, the the system analyzes all of that.
Stanley Tate (15:54):
Got it. Okay. I want to ask you a question here about your experience with the average borrower that you're seeing. I guess what does that profile look like? Is it going to be their income, their age? Do you have rough idea of what you normally are seeing there, income, age?
Chanon Slaughter (16:12):
Yes, sir. That is a very good question. Well, I'm going to tell you for the last four, five, six years... I've been over here where I am for about two and a half years. Before that, I was with the big banks and they talked about the next wave of homeowners, and the millennials and those that were stuck in a house with the mortgage crisis and things like that.
Chanon Slaughter (16:31):
Well, what I'm seeing with this program, a lot of folks that was maybe at home with mom and saying "Oh, maybe a few years from now," they're on fire. They're like, "Wait a minute. You're going to pay student loans and then help me buy. I graduated high school in '93. I'm getting a lot of applications that was born in '93, so it's a younger crowd that I'm seeing. It's under 30, 30 and under that I'm seeing, and I think that was the purpose. I know that's what the purpose was with IHDA. When they sat down, they wanted to drive these younger borrowers to get them into home ownership and let them know that the student loans don't stop you.
Other mortgage options
Stanley Tate (17:10):
Oh, man, that's awesome, bro. I'm glad to see it because I get so many borrowers and young people that get discouraged about not being able to get a home and not participate in the American dream because they have student loan debt. And it's exciting to hear you say that actually, it's even trending lower too. We're having more and more young people going out and getting in as well. So it's really dope. I guess the other question I want to say is, let's say someone comes in and for whatever reason they end up not being a good fit for the SmartBuy Program. Then, do you then try to pivot them into another loan vehicle to see what you can do for them?
Chanon Slaughter (17:46):
No question, no question. I'm going to give you options. I'm big on that. I don't like to just say, "Oh no, thanks for calling." No, I'm not like that. I'm going to break it down and say, "Hey, if you don't qualify for SmartBuy, IHDA has some other programs. This is what you qualify for." If you come in and I can't get you approved at all, I'm going to tell you why. I'm going to say, "Look, this is what you need to do. Now, I'm not a credit repair person, so I'm not going to offer services to fix your credit. But I have a credit calculator and I'll be able to put your credit in there and tell you, do this, do that and then come see me in six months and you'll be able to buy it." So, no question, if you don't qualify for this program, there's other programs out there. And, ultimately, it's better to own than to get your landlord rich.
Stanley Tate (18:34):
Just kind of full coverage here, what loan vehicles do you work with? We know it's going to be IHDA backed, which are going to be Fannie Mae. Are you also doing FHA, Freddie Mac, VA, USDA?
Chanon Slaughter (18:45):
Yes, sir. Do them all, Fannie Mae, Freddie Mac, FHA, the VA. I even have broker loans where we do bank statement loans and no-doc loans for investors. So I have a whole suite of mortgages.
Chanon works with homebuyers everywhere
Stanley Tate (19:00):
All right. My last mortgage guy, he said, "Dude, I work with people all over United States." Is that true for you as well, or do primarily "I deal with Illinois people?"
Chanon Slaughter (19:10):
Guaranteed Rate, we are licensed in 50 States. My team, I'm in Illinois, my license is in Illinois, but I have VPs on my team from pretty much any state. So we'll work with whomever. You want to buy a house, want to buy the Sears Tower, whatever it is you want to buy, call us and we can help.
Average home buying timeline
Stanley Tate (19:30):
All right. Cool. Couple more questions I want to ask. What is the average home buying timeline from pre-approval to purchase that you're seeing?
Chanon Slaughter (19:41):
Well, I mean, you can call today, get pre-approved, and 30 days later be in your home. I mean that, but average, right now this market is on fire. So it's like bidding wars for everything. But the pre-approval process, I'm telling everyone right now 24 hours to get you pre-approved just because the SmartBuy has me working. Once you get that letter in hand, you're going to dictate how long before we close. I mean, my team, we take 30 days to close. We ask for 30 days on any contract. That's whether it's a IHDA bond loan or... The only loan we ask for more time is the renovation loans.
Chanon Slaughter (20:21):
So when I give you that letter, I'm going to give you a quote as well to break down the cost, the payment, the rates, and then at that point, it's just a matter of finding the house. That always varies. I get some folks that first weekend. I get other folks, it's maybe three months before they find something. But the process from contract to close is 30 days.
Common issues that affect closing
Stanley Tate (20:42):
Man, that's awesome, bro. I guess in that process, that from contract to closing, what are some common issues that pop up where are last second issues that you're trying to fix, that maybe people can get a head start on?
Chanon Slaughter (20:58):
That's a very good question. One thing is the money that's going in and out of our accounts. That's a huge thing, especially now with Zelle and it being so easy to send money. For the asset requirements, we're going to look at your bank statements. And so, large cash deposits, things like that, those can be red flags. Those could be things that we deal with. Those are not things that's going to get you denied, but those are things that can delay the process.
Chanon Slaughter (21:29):
Things that could get you denied is undisclosed debt, tax liens, child support. I get people that clean off foreclosures, clean off bankruptcies. I'll get the credit report. It's a 700 credit score, run it through the automated underwriting system, get approved, get a contract, submit the loan, and then the underwriter has the ability to pull public records and see everything there is about you before they issue that approval. And we get into the process, I don't know, you've tricked the system or your credit expert has trick the system. And then once we pull that public record search or whatever it is that we pull, we'll see, "Hey, Mr. Such-and-Such had a foreclosure a year ago," or a tax lien or anything like that. So it's just best to be upfront., honest, tell us about all paths, blemishes, because there's a recovery period for everything that has happened to you.
Bank statement look back is 2 months
Stanley Tate (22:19):
Yeah, definitely. What's with the bank statements? How far back are you asking statements for?
Chanon Slaughter (22:25):
Good question. We take the last two months bank statements.
Stanley Tate (22:28):
Chanon Slaughter (22:28):
Yep, and that's pretty much it. [crosstalk 00:22:33]. Go ahead. [crosstalk 00:22:35]. No, go ahead.
Stanley Tate (22:37):
I was thinking just because I've seen some borrowers who are also, they have a business and so they may have EIDL funds, PPP monies that are sitting in there that have been in their pre, the last two months, and is sitting there as money. I'm guessing, all you're looking at is what are the balances there and what transactions have occurred in in that two-month window there, aside from [crosstalk 00:23:01] whatever mortgage questions are being asked about where money's coming from.
Chanon Slaughter (23:04):
Stanley Tate (23:04):
But we're worried about that two-month window of transaction history?
Chanon Slaughter (23:09):
That's correct. That's correct. Let's say the first month you had $1,000. The second month, all of a sudden you've got 20,000. We're not saying it has to be seasoned, meaning it had to be there two months. We just need to see what happened. If you got a $20,000 deposit, where did the money come from, and we're able to use it as long as you can show proof it's a acceptable source that we can use. You mentioned the PPP loans and that. That is huge. That's a huge because... and I'm just, I can be real on your show. Right? Yeah.
Stanley Tate (23:44):
Yeah, yeah, yeah, yeah, yeah. I see people that, like they got this money. They think they can use it for things. I'm like, "It doesn't work like that," but there's also understanding how do the rules work and how do we set ourselves up for success instead of causing issues long-term?
Chanon Slaughter (24:00):
Yes. This is the amazing thing. We see it. You may have gotten those funds three months ago. We didn't see it in your bank statements. But your credit report will have a SBA inquiry on it. So I'll ask customers, "Hey, we need proof of your business." And they're going to say, "Oh, I don't have a business." "No, you have a business." "No, I don't have a business. I just gave someone my Social Security Number, and I ended up with this money." No, I mean, that's not going to work. [crosstalk 00:24:27]
Stanley Tate (24:28):
I know you're seeing all type of cases like that, bro.
Chanon Slaughter (24:29):
Man, I see it all day, every day. I get and I asked him, and the funny thing is, folks are... They clam up with me. And I'm thinking, don't clam up with me, the lender. You might want to think about the SBA that you just told you had a business that you don't have a... So that's the thing, man, is just we're going to see it. We're regulated by the same folks that's taxing us and all the rest of it. So you're not getting away from it, man. You're not. So it doesn't stop you.
Chanon Slaughter (25:00):
Now, the one thing about a Fanny conventional loan, if we don't need your business income to qualify, then we can really care less about the business. It doesn't matter. But, again, those deposits for the PPP loans, you will have to explain.
Stanley Tate (25:15):
Yeah. No. I definitely know there's plenty of people who were like, they thought they was just getting some free money and didn't realize what was actually happening on the backend, that someone was actually putting out some paperwork in your name. And you was like, "Oh, I got the money," but actually some bullshit happened there too.
Chanon Slaughter (25:33):
Believe it. I got family that know I'm in this business. So after they spend that money, they call me and say, "Chanon, can I get in trouble?" I'm like, "Did you have a business?" And you know the answer before you even call me. So have fun, ball out, and enjoy yourself, but this money is tracked. So that's all I can tell you.
SmartBuy mortgage eligibility requirements
Stanley Tate (25:52):
Yeah. No. Awesome. All right. Let me go ahead and just want to recap here at the end just to be clear. With the SmartBuy home program, what is ideal candidate you're looking for?
Chanon Slaughter (26:05):
Pretty much been on your job two years or either just graduated and started in your field. We're looking, like I said, the credit score requirement is 640, but my expertise, in that 680 range is the sweet spot where the system's going to approve you. First-time home buyers, those that want to own and build wealth and stop getting their landlords rich. For me, everyone's ideal because I'll help anyone, because no matter where you are right now, that doesn't mean you're going to be in the same place six months from now. But, ultimately, someone's been paying the bills. I mean, we all know. It's we know what we're doing. We know we're acquiring and whether or not we're paying it, so it's bottom line.
Chanon Slaughter contact information
Stanley Tate (26:49):
Awesome. And then how do people best get in contact with you?
Chanon Slaughter (26:53):
You can call my cell phone at (708) 945-3699. You can email me at chanon, C-H-A-N-O-N, dot, slaughter, S-L-A-U-G-H-T-E-R, at rate, R-A-T-E, dot com. Either or texts, call voicemail, send a kite, whatever it is. This is what I do. Reach out. You can go to my website and it's wwwrate.com/chanonslaughter. I'll be happy to help, any questions, text, email, call, and I have no problem with helping.
Stanley Tate (27:35):
All right. Awesome, man. [inaudible 00:27:37], you've been such a blessing today. I truly appreciate it. Thank you so much for your time today, sir. Thank you. I really do appreciate it.
Chanon Slaughter (27:43):
Sir, I appreciate you having me and keep up the good work.
Stanley Tate (27:48):
All right, man. Thank you. Have a wonderful day.
Chanon Slaughter (27:51):
All right. You as well.
Stanley Tate (27:51):
All right. Peace.