There is a lot to learn when buying a home, but would-be homeowners should always proceed with caution as they attempt to educate themselves. Frankly, not everything that you will hear is true. For example, many people insist that you must have a 20-percent down payment. In reality, almost 60 percent of buyers finance the purchase of their new homes with down payments of 6 percent or less, according to the National Association of Realtors. Are you still stumped by the prospect of putting together a down payment? Don’t be. Although they are not widely advertised, a variety of down payment assistance programs are available. What is down payment assistance? If you’re eager to buy a home but short on cash to put down, down payment assistance might be the ideal solution to your dilemma.
What Is Down Payment Assistance?
What is down payment assistance? The name gives it away. As Magnify Money explains, a down payment assistance program is an opportunity open to people purchasing a home that provides a helping hand with a down payment. Many of these programs also help prospective homebuyers with closing costs. Here’s what you need to know:
How Do Down Payment Assistance Programs Work?
Down payment assistance is not a one-size-fits-all, singular thing. Instead, it is a variety of different programs covering different geographic areas. These programs share a purpose, however: they exist to provide money to qualified homebuyers for all or part of their down payment. The programs are commonly run by a mix of nonprofit organizations and state and local housing authorities. Some lenders also offer these programs. As SmartAsset reports, the form of assistance, the eligibility requirements, and the amount of assistance available vary from program to program, so you will need to investigate the offerings in your area.
What Types of Down Payment Assistance Are Available?
The help offered by a down payment assistance program generally takes the form of a grant or loan and comes with the requirement that you make the home your primary residence for a certain period of time (source). If you fail to keep up your end of the bargain, you may need to repay the funds promptly. Popular types of down payment assistance include the following:
- Grants: The money provided by programs offering grants does not have to be repaid as long as you fulfill the program’s terms.
- Second Mortgages That Are Forgiven Over a Specific Period of Time: These loans generally only need to be repaid if you move, refinance, sell, or pay off your first mortgage before the funds are forgiven.
- Second Mortgages with Deferred Payments: In most cases, payments on these loans begin when you move, refinance, sell, or pay off your primary mortgage.
Who Can Qualify for Down Payment Assistance?
Could you qualify for down payment assistance? That depends on your circumstances and the programs available in your area. According to the National Association of Realtors, there are programs designed to serve buyers with a wide range of credit scores, incomes, and experiences. U.S. News & World Report lists several factors that down payment assistance programs tend to weigh when determining eligibility and level of assistance:
- Your location
- Your income
- Your credit score
- Your debt-to-income ratio
- The size, value, or type of property that you are buying
- If you are a first-time homebuyer
- If you have completed a homebuyer education program
- If you have served in the military
- If you are employed in a public service field
How Do I Find Down Payment Assistance?
Although there are numerous down payment assistance programs, finding one can take some detective work. Zillow suggests talking to your mortgage lender or real estate agent. You can also search online at websites like the Down Payment Resource Center.
If you have any questions about your down payment options, our team can help. At PrimeLending of Springfield, Missouri, we work hard to help you reach your housing goals. Our knowledgeable loan officers make it a point to keep up with the available down payment assistance programs and would be happy to help you explore and evaluate your options. To discuss your needs and goals, contact us today.