Are you a first-time homebuyer worried about how to come up with a down payment? You may be surprised to learn that there are a number of down payment assistance programs (DPA) and grants available that can help you out.
In this post, we’ll look at what down payment assistance is, how it works, and some of the different programs that are available. So, if you’re wondering whether you might be eligible for some help, read on!
What is Down Payment Assistance?
Down payment assistance is financial help that can be used to cover the down payment and/or closing costs when buying a home. It can come in the form of grants, low-interest loans, or other financial assistance programs.
There are many different types of down payment assistance programs available. Some are offered through government agencies, while others are provided by private organizations. Some programs are open to all first-time homebuyers, while others have specific eligibility requirements.
The programs available for down payment assistance generally fall into one of three categories. We’ll define these here and then get into more specifics later in the post.
Grants: A grant is money that you can put toward your home purchase. It doesn’t have to be paid back.
Forgivable loans: Forgivable loans are loans that won’t have to be paid back if you meet certain conditions defined by the assistance program. A lien is placed on your home, but it’s removed once the loan is either forgiven or paid back.
Deferred payment loan: A deferred payment loan is one that must be repaid, but not right away. You pay it back at some point down the line. This isn’t always the case, but they often come at 0% interest. Again, a lien is placed on your home until repayment.
Who Qualifies as a First-Time Homebuyer?
Down payment assistance programs are typically meant for first-time homebuyers. However, a repeat homebuyer often counts as a “first time” buyer” if they haven’t owned a home in the past three years. Other factors can be considered as well. Below, we outline a few of those that could allow a buyer to qualify.
buying a primary residence
buying within local purchase price limits
using an approved mortgage program
working with an approved mortgage lender
Keep in mind that every down payment assistance program is a little different. The exact criteria to qualify will depend on where you live and which programs are available. Also, you could get more money and qualify easier if you’re buying in a so-called “target area.” A Highlands loan originator can help determine if your property is eligible.
Good News! Highlands Residential Mortgage can help connect our borrowers to many down payment assistance programs! Something else to consider, in terms of down payment, while putting down 20% is ideal for most loan types, it certainly isn’t required! Below are a few examples of loan options with lower down payment requirements.
If you’re ready to move forward with the mortgage process or would like to further discuss down payment assistance and mortgage options that best fit your needs, find a Highlands loan originator in your area today!