Yes, there are governmental grants available in Illinois, such as the Downpayment Plus, that CAN be applied to FHA loans, but 1.) you have to be income eligible (up to 80% of median income in Cook County for your family size) and 2.) you have to take a free 3 hour class. With this $4,000 grant, you need a minimum of a $750 downpayment. However, if you don't have an extra $6,000 lying around, you will need closing cost help... and in the city of Chicago, closing costs are much higher than the suburbs (on a 165k house, the closing costs are about $5000, plus the attorney, inspector, and prepaid insurance (another $1500 or so)). So, given that you need closing cost help, foreclosure properties really aren't an option for you because banks have already lost a great deal and are not in a position to help you. And that goes doubly for short sales. But don't give up. I've been finding some pretty good deals out there on the estate sales. Good luck!