Buying a home is a big financial decision. The costs associated with homeownership can seem a bit daunting, and for many people, saving for a down payment seems to be the biggest hurdle. Even if you haven’t had a chance save for a large down payment, there are still some wonderful opportunities for purchasing your own home.
Many potential homebuyers are unaware that down payment assistance programs exist and are very accessible.
What is Down Payment Assistance?
Down payment assistance is a special financing program that helps make homeownership a reality for homebuyers who otherwise may not have the funds for a down payment. In order to qualify, both you and the home must meet certain requirements in order to receive assistance. If all requirements are met, you may receive the DPA funds as a grant toward your down payment and any associated closing costs.
Who Offers Down Payment Assistance?
Most commonly, many state, city, and county agencies, known as housing finance agencies, offer this financial assistance. Some housing authorities and non-profits offer similar programs. Sometimes, down payment assistance may also be available directly through your employer. Your mortgage banker is a great resource to find out if you qualify.
Who Qualifies?
Down payment assistance is not available for all prospective homebuyers. Typically, these programs are for first-time homebuyers with low median incomes. However, each assistance type and state have their own rules for eligibility.
A first-time homebuyer is defined as someone who hasn’t owned a home for at least three years. Even if you’ve owned a home before you could still be considered a first-time homebuyer. If you think this applies to you, be sure to talk to your mortgage banker about down payment assistance options.
Some areas have created homebuyer programs to help people in specific careers, such as teachers, policemen, firefighters, and healthcare professionals.
There are also minimum credit score requirements for each of the various programs. Regardless of whether you qualify for a DPA, it’s always a good idea to be mindful of your credit.
Is Down Payment Assistance a Loan?
The perk to DPA is that it’s a grant-based assistance program, meaning these funds don’t need to be paid back like a loan does. DPA recipients must stay in the home they purchase for a certain period of time, which is called an affordability period.
