How Down Payment Assistance Programs Can Help You Achieve Homeownership

How Down Payment Assistance Programs Can Help You Achieve Homeownership

If you’re thinking of buying a home but are concerned about the down payment, this article is for you. Here is some information on how down payment assistance programs can help you buy a house. 

What are Down Payment Assistance Programs? 

Just like they sound, down payment assistance (DPA) programs exist to help homebuyers get enough cash for a down payment. There are over 2,000 DPA programs offered across the country. Many of them are offered by your local state, county, or city government. 

There are essentially four types of DPA programs. 

Down Payment Assistance loans are very low-interest loans that you have to pay back but the fact they’re very low interest doesn’t make them too much of a burden. 

Down Payment Assistance grants are money that is offered without you having to pay it back. 

Deferred Loans are second mortgages. You don’t pay anything until you sell the home or refinance your mortgage. 

Forgivable loans are second mortgages that will be forgiven over several years but would need to be repaid if you sell or refinance before the term is up. 

How Do You Qualify for Down Payment Assistance?

DPA is great but not everyone qualifies. Meant to help first-time homebuyers, here are a few common requirements. Keep in mind that each program is different so the best thing we recommend is to find your state on the U.S. Department of Housing and Urban Development, then look for “Homeownership Assistance.” 

But in general, here are a few common requirements:

  • Must be a first-time homebuyer
  • The homebuyer must have a low or moderate-income – high-income buyers won’t qualify
  • The purchased home will be the homebuyer’s primary residence – not a rental, second home, etc. 
  • It must be used in combination with an approved lender and mortgage program
  • The home may need to be in a specific area

Some programs have other types of requirements though. For example, the MyHome Assistance Program in California requires you to complete a homebuyer education counseling program. 

How Much Can You Get with Down Payment Assistance?

The short answer is that it depends on the program. For example, the CalHFA program is a deferred-payment junior loan of up to 3.5% of the purchase price or appraised value of the home, whichever is less. 

So if you’re buying a home for $300,000, you can get a loan of up to $10,500 to go towards the down payment. 

Other programs may be more or less, your best bet is to check on your local program. 

Are There Downsides to Getting Down Payment Assistance?

On paper, the answer is no. In the 2022 housing market, the short answer is “maybe.” 

Due to the housing shortage, some of the most competitive offers are those who come to the table with enough cash to buy the home outright. The advantage to cash is the seller can move as fast (or slow) as the buyer allows. 

The other advantage to cash is there’s no risk of the buyer’s mortgage falling through. They’ll be able to buy it because they have the money sitting in the bank to do so. 

If you’re using down payment assistance, that means you don’t have enough cash to buy it outright. Even if your offer is competitive from a numbers standpoint, a cash offer may win the day. 

But don’t let that deter you from getting DPA. If you’ve been saving for a while, you went through the exercise to estimate your monthly payments and you’re almost there, a down payment assistance program may be just what you need to get you over the finish line. 

Conclusion

Do you have any questions about down payment assistance? Send us an email here or call us at (949) 271-7802. We look forward to helping you in any way we can!