A 2017 Zillow survey of 10,000 American adults found that two-in-three people who were then renting identified saving for a down payment as their biggest obstacle to homeownership.
If you want to become a homeowner, but you don’t have enough cash for a down payment, a state or local down payment assistance program might be able to help. Most states and many counties and cities offer grants as well as no-interest loans to help first-time homebuyers pay for down payments and closing costs.
How do down payment assistance programs work?
Down payment assistance (DPA) programs help homebuyers with loans or grants that reduce the amount they need to save for a down payment. The help comes through state housing finance agencies as well as city and county government programs aimed at meeting affordable housing needs. Often down payment assistant offer the programs in combination with mortgages for to first-time home buyers.
There are four main types of down payment assistance programs:
Loans that are paid down along with your first (main) mortgage
Ones with deferred payments, which only have to be paid when you move, sell, refinance
Loans that are forgiven over a set number of years, and therefore, only need repaying if you move, sell, refinance
Grants, which are essentially gifts that you don’t have to pay back
Why so many different programs and different rules?
All sorts of sources fund DPAs. Money might come from federal, state, city, county and as well as charitable funds. Additionally, each of those is free to set its own eligibility criteria and rules.
Most down payment assistance programs are for first-time buyers, but don’t count yourself out if you’ve ever owned a home. The programs typically define a first-time buyer as one who hasn’t owned a home for the past three years.
Some local programs target certain groups, such as teachers, police officers, emergency responders or city employees, while others are open to qualified repeat buyers.
Vellum has the options to fit your unique financial story
Vellum Mortgage, Inc I NMLS ID#: 1657323 (nmlsconsumeraccess.org). This is an advertisement and not a guarantee of lending. Terms and Conditions apply. Credit requirements, LTV as well as CLTV minimums, DTI maximums and other restrictions apply. Subject to underwriting guidelines and approval. Additionally, programs are subject to change and not available in all states or counties. Standard fees apply. This product or service is not approved or endorsed by any governmental agency, and this offer is not made by an agency of the government.