How Does Down Payment Assistance Work?
Thinking about buying a home but need help funding your down payment? A down payment assistance program can help! Down payment assistance programs are an often overlooked resource that you can take advantage of when you're buying a home.
Read this article to find out what down payment assistance is and how you use it to give you an edge in buying your home.
Please call our office to learn about our home lending programs and read on to see where to find down payment assistance programs.
The Basics of Down Payment Assistance
Down payment assistance is part of your down payment is usually funded at the state or local level by a nonprofit charitable organization or even a public entity, such your labor union or employer. There are also programs provided by lenders!
A grant-type of down payment assistance, such as those from a nonprofit, must meet two requirements for it to be considered assistance and not a gift. First, it must be available through an application process and second, the grant must be available to the general public. In other words, the grant cannot be created just for you.
Down Payment Assistance from Sellers
Before the laws changed in 2008, sellers could contribute to the buyer’s down payment through a "middleman" service that kept an account for the buyer. Although this option is no longer available, there are ways that the seller can still help you with the down payment.
The trick is to negotiate for other items as part of the home buying transaction. For example, you can ask the seller to assist with attorney fees, real estate tax services, or the title insurance. You can also ask the seller to help pay for points to lower your interest rate or to contribute to your property taxes.
Keep in mind that there is a limit as to how much the seller can contribute. The limits are based on the type of home loan you’re using.
Call us to find out the what these restrictions are.
Where to Find Down Payment Assistance
The following information applies to the most common down payment assistance other than the seller concessions discussed above. Programs vary based on location, so please call us for the most accurate information for the area you're looking to buy in.
Public Assistance and Grants
Public grants often have particular groups that they target. They can be challenging to find, but well worth your time. We recommend beginning your search at our local Department of Housing and Urban Development. They often have a curated list of housing programs available for the state.They may even also list city programs!
Even if you can't be matched with a down-payment assistance program, there are plenty of other options for you to consider!
From low down-payment government loans to stable low-rate conventional loans, there is a loan for financial situation.