4 Frequently Asked Questions About Down-Payment Assistance Programs
From determining eligibility to finding the right lender, these questions should help point you in the right direction toward your dream house.
Making a down payment on a home is a huge step – and one that most Americans get anxious about. Convention holds that prospective homeowners should be prepared to put down 20 percent of the home’s total value, which can mean having to spend tens of thousands of dollars.
For first-time homebuyers, pressure to have money for a down payment can be tremendous, and can make the dream of purchasing a home seem inaccessible. While there are a number of options that would-be buyers can explore to making purchasing a home more affordable, many don’t know where to start.
Below are four of the most frequently asked questions that people make when exploring down-payment assistance programs.
1. What are down-payment assistance programs?
A down payment plays a huge role in financing any home purchase, but a down-payment assistance program makes it easier for income-eligible applicants to invest in property. Down-payment assistance can vary, and may be in the form of low-interest or interest-free loans, as well as grants. Federal programs like FHA loans allow applicants to put down a smaller down payment – typically 3 percent of the home’s total value. Many down-payment assistance programs may also be offered to homebuyers as a second, silent mortgage that is repaid only when the house is sold or the mortgage is paid off.
2. Am I eligible?
There are many factors that determine eligibility for a down-payment assistance program, but income isn’t necessarily always the deciding factor. Some applicants who are veterans may qualify for certain state or federal-sponsored loans or grants; additionally, those earning close to their community’s median area income may still be eligible for help, depending upon when they apply. The most important thing about down-payment assistance programs is to put the money that is available to use, as funds are often not fully utilized because those struggling to come up with a down payment may not think they qualify for help.
3. Where can I find a lender?
The surprising part about down-payment assistance funds is that you may find resources where you least expect. If you’re looking for a lender, you should start by checking out state housing authority websites, which should offer a list of programs and participating lenders. Local banks and private lenders, like Fannie Mae, may also offer help for first-time homebuyers looking to get help with a down payment. Because every assistance program is different, and may offer unique terms for the loan, be sure to read the fine print before you settle on any one specific lender.
4. Is this right for me?
Before choosing any type of loan, it’s important that consumers consider what the repayment schedule for the loan will really be, and whether it’s compatible with long-term financial or life goals. Most consumers know to avoid subprime loans because of their risky nature, but determining which loan or program may be the right option can be difficult. Down payment assistance programs are versatile, meaning that assistance may come in the form of a grant or low-interest loan, but they’re also subject to change significantly, so it’s essential that homebuyers do their homework and take the guesswork out of the equation before committing to any conditions.
If you still have questions about the loan application process, here is a breakdown of what you’ll need, and what you’ll need to know.