What to Know About Down Payment Assistance
November 4, 2023
If you must buy a home with today’s higher interest rates for FHA mortgages and other home loans, you may consider looking at a local down payment assistance program in your state.
Buying a home using down payment assistance potentially frees up cash to be used in other areas for your home purchase.
It may also help you to hang on to more of the money you saved for the down payment to use later on when mortgage payments begin. Paying more than the minimum due each month can help you save money over the lifetime of the mortgage.
But what do you need to know about down payment assistance, also known as DPA?
DPAs Aren’t for Everyone
Not all who apply for an FHA mortgage qualify for down payment assistance. Some don’t qualify because they earn too much.
Many of these programs are need-based, and income restrictions may apply. And it might not just be the income of the applicant. Some states look at household income, not just applicant income.
First-Time Homebuyer Requirements May Apply
This one confuses some new house hunters and repeat buyers who haven’t purchased property in a while.
“First-time homebuyer” typically means (for DPA purposes) that you have not owned a home in three years. It does not always mean “someone who has never owned a home before.”
Certain Credit Scores May Be Required
Some down payment assistance programs have a required minimum credit score, so it’s a great idea to start monitoring and working on your credit earlier than you might expect when saving for a mortgage.
Purchase Price Restrictions May Apply
Some downpayment assistance is only allowed for homes within a price threshold. There is no standardized dollar amount in such cases. It all depends on the state, the program, and other factors.
Occupancy Required
Yes, FHA loans typically require occupancy, no surprise there. But some DPA have multiple requirements in this area, and what that means is that you may be required to occupy the home for a minimum amount of years without selling or moving. Those who don’t comply with such regulations (which vary based on the program) may be asked to repay some or all of the DPA.
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RELATED VIDEOS:
What Is an FHA Loan?
Using an FHA Loan Calculator
Meeting FHA Loan Guidelines Improves Your Chances
Buying a home using down payment assistance potentially frees up cash to be used in other areas for your home purchase.
It may also help you to hang on to more of the money you saved for the down payment to use later on when mortgage payments begin. Paying more than the minimum due each month can help you save money over the lifetime of the mortgage.
But what do you need to know about down payment assistance, also known as DPA?
DPAs Aren’t for Everyone
Not all who apply for an FHA mortgage qualify for down payment assistance. Some don’t qualify because they earn too much.
Many of these programs are need-based, and income restrictions may apply. And it might not just be the income of the applicant. Some states look at household income, not just applicant income.
First-Time Homebuyer Requirements May Apply
This one confuses some new house hunters and repeat buyers who haven’t purchased property in a while.
“First-time homebuyer” typically means (for DPA purposes) that you have not owned a home in three years. It does not always mean “someone who has never owned a home before.”
Certain Credit Scores May Be Required
Some down payment assistance programs have a required minimum credit score, so it’s a great idea to start monitoring and working on your credit earlier than you might expect when saving for a mortgage.
Purchase Price Restrictions May Apply
Some downpayment assistance is only allowed for homes within a price threshold. There is no standardized dollar amount in such cases. It all depends on the state, the program, and other factors.
Occupancy Required
Yes, FHA loans typically require occupancy, no surprise there. But some DPA have multiple requirements in this area, and what that means is that you may be required to occupy the home for a minimum amount of years without selling or moving. Those who don’t comply with such regulations (which vary based on the program) may be asked to repay some or all of the DPA.
------------------------------
RELATED VIDEOS:
What Is an FHA Loan?
Using an FHA Loan Calculator
Meeting FHA Loan Guidelines Improves Your Chances
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