Are you having trouble saving up enough money for a downpayment? You’re not alone.
In fact, saving for a down payment is the largest obstacle to homeownership, according to a recent Zillow Housing Aspirations Report.
While there are several mortgage programs available that offer little or 0% down such as the no money down USDA Loan, no money down VA loan, or the 3.5 percent down FHA Loan, saving up for all the costs associated with homeownership can still be a major struggle for first-time buyers.
Unfortunately, a large number of homebuyers are unaware that a myriad of downpayment assistance programs exist to help overcome that obstacle.
And, with the start of the new year, many downpayment assistance programs whose funds ran out in 2018 have new grant funds available for 2019.
Have questions about your egibibility for downpayment assistance?
As your local lenders, we’re here to answer all of your downpayment assistance questions.
First of all, what is downpayment assistance?
Downpayment assistance is a financing program that helps potential buyers achieve homeownership by providing them with funds for a downpayment or closing costs. Most commonly, downpayment assistance programs are funded by the state or local government, or a nonprofit organization, in an effort to help home buyers that might otherwise be shut out of the housing market.
These programs were designed to help bridge the gap and help more people achieve homeownership.
Who can qualify?
Both the homebuyers and the house they are purchasing must meet certain eligibility requirements to receive downpayment assistance. Generally, eligibility is based on your income, and how much home you are purchasing.
Programs are typically designed for first-time homebuyers with low to median incomes. However, income and purchase price limits often vary from program to program and can even vary depending on your location.
For instance, first-time homebuyers in the Richmond, Virginia area must have a household income of less than $70,500, per household of two or fewer people, to be eligible for the VHDA Downpayment Assistance Grant. The same program’s income limit in the Washington D.C. area is $100,500, due to the higher cost of ownership in that area.
The VHDA Downpayment Assistance Grant provides eligible first-time homebuyers with up to 2.5 percent of their home’s purchase price.
In some cases, home buyers who receive the grant funds must take a course on homeownership in order to qualify.
Homeownership courses allow first-time buyers to fully understand every aspect of their mortgage and the responsibilities and benefits of homeownership. They can also provide helpful homeownership and financial tips.
Does downpayment assistance need to be repaid?
In most cases, no.
Assistance can be offered in the form of grants, which do not have to be repaid. Of course, there are some rules and regulations. For example, grantees must use the home as their primary residence. In some instances, the buyers must live in the home for a certain amount of time, known as an affordability period, to avoid having to pay the money back.
With some programs, such as the Federal Home Loan Bank (FHLB) downpayment assistance program, you’re required to live in the home for a least five years. If you move before that five-year period, you’re required to pay a percentage of the money back.
These rules and regulations were designed to ensure that the grant money is not being abused by people who are not in need of assistance.
How can you find and apply to a downpayment assistance program?
A good place to start is the Department of Housing and Urban Development website, which has a list of programs available in each state.
Ask your local Towne loan officer to provide you with more thorough information on the local programs in your area and help determine if you’re able to qualify.
Even if you have enough money for a down payment, you can still ask your local loan officer if you might be able to take advantage of these programs.
In some cases, you might be able to use cash the cash in your pocket to pay down additional debts to readjust your debt-to-income ratio. A more favorable debt-to-income ratio could help you qualify for a home might have previously been outside of your price range.
If you’re interested in learning more about the benefits of a down payment assistance program, speak with your local Towne Loan Officer.
The information contained herein (including but not limited to any description of TowneBank Mortgage, its affiliates and its lending programs and products, eligibility criteria, interest rates, fees and all other loan terms) is subject to change without notice. This is not a commitment to lend.