All You Need to Know About Down Payment Assistance Programs
When it comes to buying a home, there are many steps involved and lots of expenses that can add up quickly. One big expense is the down payment, which may be difficult to come up with if you don’t have much saved. Fortunately, there are programs available that can help purchase a home more affordable for first-time buyers.Verify your mortgage eligibility (Mar 31st, 2023)
What is Down Payment Assistance?
Down payment assistance (DPA) is funding provided by the government and other organizations to help individuals purchase a home. This can come in the form of grants, low-interest loans, forgivable loans, deferred payment loans, or matched savings programs.
Who Can Get It?
Generally, these programs are designed for first-time homebuyers, however, there are exceptions. If you haven’t owned a home in the last three years most programs consider you a first-time buyer.
How Do These Programs Work?
The specifics of these programs vary, but here is an overview of what they may include:Verify your mortgage eligibility (Mar 31st, 2023)
Grants - Grants are one-time payments that you don’t have to pay back. Some programs offer grants of up to a certain percentage of the purchase price of the home (typically 5-20%), which can cover all or part of the down payment and closing costs.
Low-interest loans - Low-interest loan programs may provide financing for down payments and closing costs, which are paid back over time. These loans may have a 0% interest rate or a slightly higher interest rate than other types of mortgage financing.
Forgivable loans - Forgivable loans are similar to grants in that you don’t need to pay them back; however, the terms of the loan will usually state that you must live in the home for a certain period of time before the loan is forgiven.Verify your mortgage eligibility (Mar 31st, 2023)
Deferred payment loans - Deferred payment loans are similar to forgivable loans, but they require repayment if you sell or move out of the home before the end of the term.
Matched savings programs - Matched savings programs provide matching funds for a portion of the down payment. The funds are provided by the lender and typically require a minimum contribution from the borrower.
Are Closing Costs Covered?
Some DPA programs do cover closing costs, however, it is important to check with your lender or the program administrator to see if this is an option. Most programs require you to have some savings that can be used for closing costs.Verify your mortgage eligibility (Mar 31st, 2023)
What is the Process / How Long Does It Take?
The process of obtaining a DPA varies by program, but typically involves the following:
- Submit an application: You will need to provide income and asset documentation, as well as information about the property you are purchasing.
- Undergo a credit check: This is done to make sure that you have a good credit score and that you can afford the mortgage.
- Receive approval: If your application is approved, you will be assigned a loan officer who will help you with the paperwork and closing.
- Close on the loan: Once all of the paperwork is in order, you can close on your loan and begin making payments. The process of obtaining a DPA can take anywhere from a few weeks to several months, depending on the program.
How Can I Qualify?
In order to qualify for DPA, you will need to meet certain requirements. They are:
- Have a steady job and income
- Meet the program’s credit score requirements
- Have sufficient funds to cover closing costs
- Be able to repay the loan, if applicable
- Meet residency requirements, if applicable
In addition, you may need to attend homebuyer education classes or workshops in order to qualify.Verify your mortgage eligibility (Mar 31st, 2023)
Down payment assistance programs can provide a great opportunity for first-time buyers to get into their dream homes. We can help you find a program that is right for you and guide you through the process. Contact us today to learn more about our down payment assistance options.
Down Payment Assistance Program eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates, and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.Show me today's rates (Mar 31st, 2023)