Down Payment Grants That Can Save You Money
Some Down Payments Biggest Obstacles For First Time Buyers
Down Payment Grants That Can Save You Money. NSH Mortgage has the wisdom and tools to help you understand how to avoid getting stuck in a large down payment. A recent survey by Trulia ended that the top challenge for would be home-buyers is the down payment requirement.
Over half of potential buyers claimed saving a down payment was a bigger issue than credit scores, income needed or housing prices. Down Payment grants can help you meet this challenge.
Down Payment Assistance (DPA) Helps First Time Buyers
Down Payment grants are designed to help eligible buyers bridge the gap between their savings and the required down payment for a mortgage. This money does not usually have to be repaid. If you are in the market for a home and struggling, here is what you need to understand about down payment grants.
Where To Find Down Payment Grants
The federal government does not provide down payment grants to individuals. Instead, the Department of Housing and Urban Development (HUD) allocates money to states, and funds are awarded to qualified buyers at the local level. Check out HUD’s website for down payment assistance.
You will find a list of state and city agencies and the programs they offer. If it is a grant you hope for, start with assistance programs. The site lists contact information for various local organizations and nonprofit providers, which administer grant programs and other assistance.
Examples Of Down Payment Programs
The Virginia Down Payment Assistance (DPA) program provides up to ten percent of the home’s sales price to eligible buyers. This DPA is a deferred conditional grant. That means you do not have to pay it back, but you must sign an agreement stating that you will maintain the home as your principal residence for five to 15 years, depending on the amount of your grant.
If you decide to sell before the period is up, then you will be responsible to pay back the amount in full. The Ohio Housing Finance Agency offers first time buyers 2.5 percent or five percent of the home’s purchase price through approved lenders. Assistance is applied to either the down payment, closing costs or other pre-closing expenses.
Recipients must remain in the home for seven years in order for the assistance to be forgiven. If you sell or refinance within seven years, the amount must be repaid. Seattle’s Office of Housing provides up to $45,000 in down payment assistance via local nonprofits and lending institutions.
The property must be located within the city limits and cannot cost more than $366,000.
Although every grant and assistance program varies, here are some general qualifications that you may be expected to meet:
- You must be a first time buyer purchasing a primary residence.
- Income limits apply. (For the Virginia program, for example, buyer income cannot exceed 80 percent of the Area Median Income.)
- There is usually a maximum home sales price, which depends on local housing costs.
- You will likely have to attend a home-buyer counseling program. These courses help educate future homeowners about managing their financial responsibilities.
- Most times, the home must be located within certain geographic boundaries.
First Time Home-Buyer Definition
You may be surprised to find that most agencies consider a first time buyer anyone who has not had an ownership interest in a primary residence within the last three years. Others who may be eligible include:
- Single parents who only owned homes while married to their former spouses
- Displaced homemakers who have only owned with their spouses
- Homeowners whose mobile homes are not permanently affixed to a permanent foundation.
- Homeowners whose property is not in compliance with building codes, and which could not be brought up to code for less than the cost of a complete rebuild.
If you have any doubt about your first timer status, ask a lender.
Preparing To Buy
If you think that you may be eligible for down payment grants or similar programs there are some things you can do right now to put yourself in the running. First, check your credit report and make sure your FICO score meets program and lender guidelines. The Ohio program, for example, requires a minimum credit score of 640.
Next, find a mortgage professional who is up to speed with first time home-buyer programs in your state and city. Many programs include a list of approved lenders who can help you. Save what you need for your closing costs and other expenses.
Your loan officer or broker can point you to programs like the First Home Club Matched Savings Program. For every $1 you deposit, the savings institution deposits $4 in matching funds up to $7,500. Understand the fine print, especially actions that could result in which you have to pay back the grant.
This might include taking out a home equity line of credit, refinancing, renting out the home, or selling before the required period is up.
Money Is There So Go Get It
A 2014 NeighborWorks America study found that 70 percent of consumers had no idea, that down payment assistance was available and in fact, much of this money goes unclaimed. Now you should understand it if you qualify, jump through the necessary hoops and claim your free money now.