A beginner’s guide to down payment assistance

10:53 AM, May 23, 2019
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Dreaming of homeownership but don’t have enough saved? Believe it or not, it is possible to get into a home for less than 20% or even 3.5% down.

Down payment assistance (DPA) programs are offered through several state and local agencies as well as public and private sponsors. Organizations that offer DPA programs include:

Federal Housing Administration (FHA)
● U.S. Department of Agriculture (USDA)
● U.S. Department of Veteran Affairs (VA)
State Housing Finance Agencies
● City and County Housing Authorities
● Non-Profit Organizations and Employers

Types of down payment programs:

Grants

There are grants available to buyers who are interested in purchasing a home, and many are not exclusive to first-time home buyers. Qualified buyers meeting the program criteria will have no obligation to pay back granted funds.

Because mortgage grants are separate from home loans, some may be combined with other programs to offer a better incentive to buy a new home.

Forgivable loans

A forgivable loan is a "soft" second mortgage that is forgiven after the homeowner has met specific criteria laid out by the lender such as a period the borrower must remain in the home. Once the homeowner has reached the requirements as determined by the lender, the loan is forgiven — meaning the funds do not have to be repaid.

Non-forgivable loans

These loans are generally a silent second loan that requires repayment when the homeowner chooses to refinance, transfer title, or sell the home. They can also be repaid at a lower percentage rate.

Specific down payment programs to consider

Colorado Housing and Finance Authority (CHFA) can help Coloradans with down payment assistance, helping them get into a house for as little as $1,000 down. Some borrowers may even be able to avoid mortgage insurance. Access to CHFA advantages is dependent on household income (which is determined at the county level and by the size of household).

Chenoa is a nationwide, affordable housing program that specializes in down payment assistance solutions in conjunction with FHA loans. Through approved lenders, the program may provide support* in the form of grants and second mortgages, up to 3.5% of the home purchase price.

● If you're located in a rural area, you may benefit from a USDA mortgage grant or loan. These programs are designed to help farmers, ranchers, and home buyers in less populated areas of the country with mortgage assistance.

● Teachers, law enforcement officers, EMT's, and firefighters, may qualify for special mortgage assistance through HUD programs. Check HUD's website for more specific guidelines and requirements.

● Military service members and government employees may qualify for assistance programs that are available through the PenFed Dream Maker's program as well as other VA loan programs.

*Chenoa Fund availability is based on state participation.

Avoid these common home buying pitfalls

● One of the biggest misconceptions that can hurt new home buyers is the belief they don’t need to bring money to closing. More often than not, you'll have to meet a requirement. So it is highly recommended that you speak with a loan officer and fully understand costs outside of the down payment before you fall in love with a home.

● It's important to remember that expenses continue even after you receive the keys. Buyers may get into trouble when they neglect to consider the additional costs that home ownership entails, such as landscaping, window coverings, and necessary repairs.

● There is nothing more embarrassing than making an offer, then arriving at the mortgage company to find out you don’t qualify after all. As a result, mortgage pre-approval is crucial. Don’t forget to stay within your price range and consider added expenses.

Above all, do your research. Taking the initiative to seek out the many opportunities available to you can make the difference between imagining your new residence and owning it. Saving for a down payment can be a challenge, but you are most certainly not alone. Help is all around. If you take advantage of these resources, you’ll be calling the house of your dreams “home” in no time.

Ready to get started? Apply online or give a salary-based mortgage consultant a call today (303) 695-7000.

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