If you’re wondering, “How can I get help with a down payment?” – you’re in the right place. We’re here to talk about making your dream of owning a home come true, and one key to that door is the down payment. In this easy-to-understand guide, we’ll explore down payment assistance, who can access it, and how you can find a program that fits you perfectly.
Understanding Help with Down Payments
When you want to buy a home by getting a mortgage (a loan to buy a house), you usually have to pay a down payment. The only exception is if you use a Veterans Affairs (VA) loan. Saving up for this initial payment can be tough for many people who dream of becoming homeowners.
A down payment is the first payment you make when purchasing a house, and it’s a percentage of the home’s price. Sometimes it’s as low as 3%, but for regular mortgages, it’s often around 20%.
The amount of down payment you need depends on the type of mortgage, the type of house you’re buying, and how much money you have.
If you can afford to put down a larger down payment, you might get a lower interest rate or be able to buy a more expensive home. Additionally, making bigger down payments can result in lower monthly mortgage payments.
Lenders ask for down payments to make the process safer for them. When you invest your money in the house, you’re less likely to stop making payments. If you do stop, you would lose a significant amount of your own money. Moreover, down payments mean the lender doesn’t have to lend you as much money.
If you need more information about the basics of down payment, you can read more here.
Understanding Down Payment Assistance Programs
Down payment assistance typically comes from state housing agencies or, at times, from cities, counties, and nonprofit groups.
There are various types of assistance available:
- Grants: These are like gifts of money that you don’t need to repay. They are given to help you with your down payment.
- Forgivable, Zero-Interest Loans: These are loans that you won’t have to repay as long as you continue to own and live in the home for a specific period, usually around five years.
- Deferred Payment, Zero-Interest Loans: With these loans, you may not have to make any payments until you sell the home, fully pay off the mortgage, or refinance it.
- Low-Interest Loans: These loans come with lower interest rates, and you have to repay them over time. They allow you to spread out the money needed for the down payment and closing costs instead of paying it all at once.
Who Qualifies for Down Payment Assistance?
Many down payment assistance programs are primarily designed for people purchasing a home for the first time, although there are exceptions.
See all first-time home buyer programs and grants here.
If you’ve owned a home before and a program specifies that it’s for first-time buyers, you might still be considered a first-time buyer if you haven’t owned a home in the past three years.
Certain programs are also available for specific groups, such as teachers or first responders.
To access assistance from most down payment programs, you typically need to fulfill specific requirements. These requirements can vary, such as meeting income limits or participating in a home-buying class. There might be conditions like buying in a particular location or staying below a specific price range. Additionally, in some cases, you may need to contribute some of your own money to the down payment.
How Can You Find a Program?
If you want to know more about programs that help with down payments, you can get in touch with the housing finance authority in your state or your local city or county government. The U.S. Department of Housing and Urban Development (HUD) has info specific to each state.
The Consumer Financial Protection Bureau has a tool that can connect you with housing counselors in your area.
When you’re ready to apply for a mortgage and use down payment help, you’ll need a list of approved mortgage lenders for that program. Usually, the local agencies and programs that help can connect you with loan officers who know what they’re doing.
Get pre-approved and check your eligibility here.
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