Receiving down payment assistance can make it easier for prospective buyers to become homeowners. This is because down payments are expensive. For low income families, down payments may be too expensive, which can prohibit these households from being able to afford a home of their own.
Down payment assistance programs are offered on federal, state and local levels. They may be offered through federal grants, through community outreach programs, by nonprofits, through lenders and much more. Therefore, it is essential that you take the time to learn more about the assistance programs that may be available to you.
Furthermore, down payment assistance grants and programs will all include a set of eligibility requirements that applicants must meet to receive benefits. Additionally, the application methods for each program will vary. Finally, you will usually need to find a lender that works with the program that you qualify for. The following sections explain more about these programs.
What are down payment assistance programs?
Down payment assistance programs are initiatives that promote homeownership and help more individuals become homeowners. The average down payment requirement for a mortgage is between 10 and 20 percent of a home’s purchase price.
For a $200,000 home, you could be looking at a required down payment between $20,000 and $40,000. That’s simply too high for many low- and moderate-income families.
Therefore, these programs provide invaluable assistance to reduce down payment requirements or provide financial aid that recipients can be put towards a down payment.
What are first time home buyer down payment assistance programs?
First time home buyer down payment assistance programs are relatively common. These programs are restricted to first-time homebuyers and cannot be obtained by an individual who has previously owned a home.
Does down payment assistance need to be repaid?
Down payment assistance does not usually need to be repaid. However, there are some cases where you may be legally required to repay financial assistance. Keep in mind that these requirements are only applicable if you misuse the financial assistance that you are provided.
Usually, this means you use the funds you receive for anything other than their intended purposes. Alternatively, you may need to repay any loan amounts you received because you do not meet any continued eligibility requirements that a program may have.
How to Find Down Payment Assistance Grants Within Your Local Area
When searching for down payment assistance programs, it is crucial that you review the programs that are available in your local area. The best grant programs are often those that are provided by:
- Local lenders.
- Investors.
- Charitable organizations.
- Nonprofits.
- Other community-based programs.
The best way to learn more about programs that are within your area is by contacting local organizations. Each lender likely works with specific assistance programs and could provide you with further details about those programs. They may also be able to tell you if you might qualify.
For example, you can receive down payment assistance in Texas through the Texas State Affordable Housing Corporation (TSAHC). The TSAHC offers financial assistance towards the cost of down payments, but also offers mortgages with competitive interest rates for first-time homebuyers, military service members and veterans.
Another example is the Florida Housing Finance Corporation. Florida Housing provides down payment assistance in Florida to those who qualify. This corporation also offers competitive fixed-rate mortgages and tax credits that can help individuals save on their mortgage expenses for several years.
Learn About USDA, VA and FHA Down Payment Assistance Information
FHA down payment assistance is offered through the Federal Housing Agency (FHA). This agency provides buyers with the option to reduce or eliminate down payment requirements for a mortgage. Similar benefits are available through the U.S. Department of Agriculture (USDA) and U.S. Department of Veterans Affairs (VA).
While these programs are different from one another, they are all government-insured loans that can reduce the eligibility requirements that an applicant must meet to receive a mortgage. Furthermore, you must use a lender that is qualified to provide options for one of these government-associated loans.
Specifically, the FHA loan program provides low-income buyers with greater opportunities, even if the buyer has a credit score that is less than perfect. For example, buyers with a credit score of 500 or higher may be eligible to obtain a mortgage with a 10 percent down payment. For buyers with a credit score of at least 580, down payment requirements are reduced to 3 percent.
Another option is a USDA loan. In some instances, these options eliminate the down payment requirement for recipients. However, this loan program requires borrowers to have a higher credit score than they would need to obtain FHA loans. Similar to loans through the FHA, USDA loans also require borrowers to agree to mortgage insurance premium (MIP) payments throughout the loan.
Furthermore, VA loans not only waive down payment requirements, but they also offer reduced closing costs. They also do not require MIPs. However, to qualify for a VA loan, you must meet military service-based requirements.
Learn About Career-Based Down Payment Assistance Programs
When seeking down payment assistance, it is essential that you review career-based grant programs that you may qualify for. Career-based programs do not usually require you to meet specific income limits. This is because eligibility criteria is based on career-related requirements.
For example, the Good Neighbor Next Door (GNND) program offers qualifying teachers, law enforcement officials, firefighters and EMTs up to 50 percent off the purchase price of a HUD home. Moreover, medical personnel of several professions can receive grants towards down payments as well as grants that are applied towards the purchase price of the home.
This is not the only program that offers assistance to certain professionals. Grant programs exist for numerous professionals, including:
- Social workers.
- Medical professionals.
- Veterinarians.
Learn About Other Home Down Payment Assistance Programs You May Qualify For
When exploring home down payment assistance options, it is essential that you learn more about national opportunities that are reserved for qualifying first-time homebuyers. While there are several national programs that provide financial assistance towards down payments and other purchase-related expenses, two of the most common are the National Homebuyer Fund (NHF) and the First Home Club programs.
The NHF provides homebuyer down payment assistance that is valued to be a maximum of 5 percent on the purchase price of a home. Another benefit of the NHF is that the fund works with multiple lenders.
Alternatively, Quontic Bank assists homebuyers who intend to take out a mortgage through them with down payments. The bank provides the First Home Club program, which allows buyers to put money aside into a special savings account they reserve for their down payment funds. The program matches every dollar that a buyer puts into the account with four dollars, and it has a matching limit of $7,500.
