Down Payment Grant
Related Terms: Down Payment Assistance, DPA Programs, Homebuyer Grants
A major hurdle people face when trying to buy a house is saving up for the down payment. To help overcome this issue, there are Down Payment Assistance (DPA) programs that provide homebuyers with grants that go toward the up front and closing costs of buying a house.
Seller-funded down payment programs were eliminated in the Housing and Economic Recovery Act of 2008, but States and Local government agencies are still permitted to help borrowers fund their homes with grants and gifts. These agencies set different requirements that a borrower needs to meet in order to qualify for the grant programs, such as property location, purchase price limits, and income caps. Many programs also require that applicants be first-time homebuyers, and enroll in homebuyer education and counselling courses.
Borrowers with high credit scores and low debt-to-income ratios who may be perfect candidates for an FHA loan might not have enough money saved to put down on a new home. Down payment grants help these applicants take advantage of different mortgage options, and alleviate the burden of a heavy down payment as well as closing costs.
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