How To Get Down Payment Assistance When Buying A Home

What’s usually needed to buy a home? Things like a solid credit score and a significant down payment so you can secure a loan.

Putting together a down payment can be tough if you don’t make much income, and most of your money goes to bills. With down payment assistance (DPA), though, you can get that cash you need to get a home without having to wait years to accumulate savings.

How does down payment assistance work? Let’s have a look so you can start seeing what opportunities are out there.

Down Payment Assistance (DPA) Programs

There are four main types of DPAs. The most common is a grant, which carries the benefit of never having to be repaid. In this sense, you could look at it as a gift or free money.

The next type of DPA is a loan that acts like a second mortgage and must be paid down with your primary mortgage.

Another DPA is a loan (second mortgage) that has deferred payments. You can put off making them until you decide to refinance, move, or sell the home.

The fourth and final type of DPA is a loan (second mortgage) that is forgiven for a specific number of years. This period can range from 5-20 years. Such DPAs only need to be repaid if you refinance, move, or sell.

The interest rates on these DPA loans vary. Some may have no interest, while others will be lower, equal, or higher than your first mortgage.

DPA Requirements

Each down payment assistance program has its requirements. Most exist to help first-time homebuyers. If you haven’t owned a home within the last three years, you could still classify as a first-time homebuyer.

Here are some other requirements that come with most DPAs:

• The home must be in a qualified area or “targeted” census tract.
• The buyer falls into either the low or moderate-income category.
• The house must be used as the primary residence.
• An approved mortgage lender must be used.
• An approved mortgage program must be used.

Mortgages That Work With Down Payment Assistance

As mentioned, you may have to use an approved lender and participate in a particular mortgage program to qualify for DPA. Again, this depends on where you live.

Typically, you can use DPA with popular loan programs such as FHA, USDA, and VA loans. Conventional loans backed by Fannie Mae and Freddie Mac commonly work with DPA too.

How to Find Down Payment Assistance

It may take a while to find the perfect DPA, as funding can come from a variety of sources, such as charitable funds, the federal level, and cities, counties, and states.

The most direct way to find these programs is to search online for “down payment assistance grants in _____.” You can fill in the blank with the desired city, county, or state.