How Down Payment Assistance Works

 

• Down payment assistance (DPA) programs help home buyers with loans or grants that reduce the amount they need to save for a down payment.

• Provided you qualify, you could receive an outright grant or a low– or no–interest loan to cover your down payment. Some DPA funds can be used for closing costs, too.

• Many programs require that you be a first–time home buyer (meaning you haven’t owned a home in three years) with a decent credit score and a low or moderate income. But not all programs have these same rules.

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Four Types of DPA Options

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1. Grants – Gifted money that never has to be repaid

2. Loans – Second mortgages that are paid monthly along with your primary mortgage

3. Deferred loans – Second mortgages with deferred payments that only have to be paid when you move, sell, or refinance

4. Forgivable loans – Second mortgages that are forgiven over a set number of years (often five, but maybe up to 15 or 20). These only need to be repaid if you move, sell, or refinance before the forgivable date.

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While down payment assistance is available to those who need it and meet the minimum requirements, these programs typically come with a higher interest or second mortgage that affects your overall buying power. However, if you are not able to pay the down payment and/or closing costs, please reach out to see if you qualify for DPA today!

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