Down Payment Assistance

What is a down-payment assistance loan program?

Down-payment assistance (DPA) is a form of financial aid that helps homebuyers cover the cost of purchasing a home. This type of assistance can be in the form of a grant, loan, or interest-free second mortgage depending on the program used. They can be originated by various types of lenders but are sponsored and regulated by several different housing entities, non-profit organizations, or local charities. They generally coincide with Conventional or FHA base guidelines but usually have stricter program-specific overlay requirements.

What are the general requirements to qualify for this type of loan?

Qualifying requirements are specific to the DPA program but usually have stricter guidelines compared to standard loan programs. Some requirements can include lower DTI ratios, higher FICO scores, or even income limits based on the area you are purchasing. Although these programs do help you get into a home, many do have fees associated with using these programs and many require you to pay back these funds at some point in time. Good news is not all DPA loans require you to be a first-time homebuyer but be sure to ask your loan officer for more specific details.

What types of properties can I use this loan on?

Many of these programs allow for most types of homes to be purchased. However, please refer to program-specific guidelines for details.

Is there mortgage insurance for this type of loan?

Mortgage insurance is usually required on DPA loan programs. Being that most are associated with Conventional or FHA base programs, generally mortgage insurance requirements will follow suit to the loan type it is connected with (i.e., FHA UFMIP & MIP, PMI, etc.).

Who are these loans best suited for?

Down-payment assistance programs can be great options for those who have good credit, low to mid debt-to-income, and are needing aid with their cash-to-close buying a home. These programs are meant to be used on primary home purchases so those looking for second homes or investment properties are out of luck. It’s also important to note that although these programs provide assistance you should still expect to come in with some money to put towards closing costs.

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