Many are unaware that thousands of down payment assistance (DPA) programs are widely available throughout the US and help reduce the amount that needs to be saved for down payments on new homes. A 2016 RealtyTrac study found that these programs save an average of $17,766 for those who qualify across 513 counties nationwide. The qualifications can differ for each program, so we’ll cover some of the similarities that many of these programs share as well as who is usually eligible to qualify for down payment assistance.
Types of Down Payment Assistance Programs
Down payment assistance is most commonly provided through:
- Grants – Free gifts that never have to be repaid
- Forgivable Loans – Zero-interest loans that become free gifts after a certain period of time or after meeting certain requirements
- Deferred Payment Loans – Zero-interest loans that are to be paid in full when moving out or after paying off your mortgage
- Second Mortgages – Loans that are added to your mortgage payments
- Matched Savings – Programs that contribute a certain amount for every dollar you spend toward your down payment
Who Can Qualify for Down Payment Assistance?
While these programs can be extremely helpful, not every buyer will qualify for down payment assistance, and not every home with either. The location of the home and your income or credit score may impact your eligibility. Oftentimes programs are reserved for those who haven’t owned a home in the past three years, and usually the home needs to be used as a primary residence. Some only offer benefits for those who provide a valuable community service, such as healthcare workers, educators, or veterans. Many require that the buyer take a homeownership education course, which can often be completed online. These qualifications can vary greatly, so it’s best to look into specific areas to find out what assistance you may be able to receive.
Advantages and Disadvantages
If you qualify for a grant or forgivable loan, you are essentially being gifted free money if you meet the specified requirements. Sometimes, however, mortgage programs offer down payment assistance in exchange for a higher interest rate, meaning that you’d save money at first, but end up paying more over time. While there are many programs that offer assistance simply to make homeownership more accessible and save people money, it’s important to understand the specifics of each program you qualify for by discussing it with your lender.
How to Qualify for Down Payment Assistance
Clearview Brokers helps home buyers in Colorado qualify for down payment assistance so they can purchase their new home. Since specific qualifications vary for each program, we encourage you to call us for more information to see if you will qualify. Our number is (720)217-5731, or you can send us a message.