February 25, 2022
Who qualifies to get down payment assistance in order to buy a home? If you are using an FHA mortgage, your downpayment requirement is, at a minimum, 3.5%.
And while that isn’t as large a down payment as you would make if you wanted to eliminate private mortgage insurance from a conventional home loan, some may struggle to come up with the money down.
Buying a home can be expensive. There are inspection and appraisal fees, there may be pest control services to pay for, title searches, and more. Saving early is the key to making your down payment easier to manage in your budget.
But even with saving early, extra help may be needed. That’s where down payment assistance programs can come in to help. But what does it take to sign up?
That depends on your circumstances. It also depends on what local programs may be offered in your area. Not all down payment assistance programs have the same features. Not all housing markets even provide down payment help but many do.
Who can use this down payment help? As mentioned above you won’t find any standardization for these programs but they do have some things more or less in common when they do share things in common.
One of those is that first-time homebuyers are usually targeted for these programs. The first-time buyer is assumed to need more help financially and otherwise and some down payment programs proceed with this in mind.
But not all who get this help are first-time buyers. Many programs allow you to apply for down payment and closing cost assistance if you have not owned a primary residence within the last three years. So don’t assume you won’t qualify for down payment help just because you have owned property in the past.
Some of these programs target specific income ranges. You may need to be what your state or local government considers to be a low-to-moderate income applicant to qualify.
In other words, some downpayment assistance programs are need-based and you would be required to prove you can qualify with a maximum household income, where those rules apply. Remember, not all programs have need-based criteria like this.
Some of these programs have income caps, it’s true, but some will waive those caps or set them higher for those who want to buy a home in a targeted area identified by the government.
But you may not be required to buy in such areas as a condition of the program (except in certain cases which may vary by state).
One of the most important things to remember about these programs is that generally speaking, they are intended for owner-occupied residences only. You cannot use this assistance to buy an investment property and some programs have specific prohibitions on renting out the home purchased with a loan that has this assistance attached to it.
You’ll need to discuss these issues with the agency offering the assistance. You can find such agencies by searching your state or local government official sites.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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