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Understanding Down Payment Assistance Options for Home Mortgages

Heather Paige Moody

Buying a home is a significant milestone, but the financial demands can be daunting. One of the biggest hurdles for homebuyers is often the down payment. Fortunately, there are various down payment assistance options available to make homeownership more accessible. Let’s explore some of these options and how they can help you achieve your dream of owning a home.

What is Down Payment Assistance?

Down payment assistance (DPA) programs are designed to help homebuyers with the initial costs of purchasing a home. These programs can provide financial aid in the form of grants, loans, or tax credits, reducing the amount of money buyers need to save before buying a house.

Types of Down Payment Assistance

1. Grants

Grants are a popular form of down payment assistance as they do not need to be repaid. They are often provided by government agencies, non-profit organizations, or local housing authorities. Eligibility for grants may depend on factors such as income level, location, and whether you are a first-time homebuyer.

2. Loans

Some assistance programs offer low-interest loans to cover down payment costs. Unlike grants, these loans need to be repaid, but they often come with favorable terms. They may be deferred, meaning no payments are required until the home is sold or refinanced.

3. Forgivable Loans

Forgivable loans are a unique option where the loan is forgiven if you meet certain criteria, such as living in the home for a specific number of years. This can be an excellent option for those planning to stay in their new home long-term.

4. Employer-Sponsored Programs

Some employers offer down payment assistance as part of their employee benefits package. These programs can include grants or loans and may be tailored to the specific needs of employees. It’s worth checking with your employer to see if such options are available.

5. State and Local Government Programs

Many states and municipalities offer down payment assistance programs to encourage homeownership in their areas. These programs vary widely in terms of eligibility and benefits, so it’s crucial to research options available in your specific location.

How to Qualify for Down Payment Assistance

While eligibility criteria for down payment assistance vary by program, some common requirements include:

  • Income Limits: Many programs are designed for low to moderate-income buyers, so there might be income caps.
  • First-Time Homebuyer Status: Some programs are specifically for first-time homebuyers, though the definition of “first-time” can vary.
  • Credit Score: A minimum credit score is often required, though it may be lower than typical mortgage requirements.
  • Homebuyer Education: Completion of a homebuyer education course may be mandatory.

Steps to Access Down Payment Assistance

  1. Research: Start by researching available programs in your area. Local housing authorities and online resources can provide valuable information.
  2. Contact Agencies: Reach out to organizations offering assistance to learn more about their specific programs and application processes.
  3. Prepare Documentation: Gather necessary documentation such as proof of income, employment history, and credit reports.
  4. Apply: Complete the application process for the programs you qualify for.
  5. Follow Up: Stay in touch with program administrators to ensure your application is processed smoothly.

Conclusion

Down payment assistance programs play a crucial role in making homeownership attainable for many individuals and families. By exploring these options and understanding the qualifications, you can take a significant step towards purchasing your home. Remember to research thoroughly and seek guidance from housing professionals to find the best assistance program for your needs. We have some new down payment assistance options…

Below shows some of the highlights on just one of the products we have! This program, available in all states except New York, offers 3.5% and 5% down payment assistance programs for FHA and USDA loans.
Product Highlights
Utilize with either FHA or USDA loan to purchase a home
Up to 5% of purchase price can be used towards borrower’s down payment and or closing costs
No Income or first-time homebuyer restrictions
Available in all States except NY

The Pathway DPA is an APM national DPA product that utilizes APM FHA guidelines for the 1st and 2nd liens. The DPA 2nd allows for 3.5% or 5% in down payment assistance funds. Purchase transactions only. Repayable: Amortized, 10-year term with a fixed interest rate 2% higher than the first mortgage.

Program Highlights
Loan types: 10-year fixed rate, 3.5% or 5% DPA 2nd (30-year fixed 1st lien)
Loan purpose: Purchase
Occupancy: Primary Residence, 1-2 Units
Min FICO: 580
Max LTV: Per FHA Agency Guidelines
No high-balance loan amounts
Available in all states except NY
Repayable, amortized, 10-year term, with fixed interest rate 2% higher than the 1st lien
After closing, the investor will not subordinate the 2nd lien for 36 months on the 3.5% DPA and 60 months on the 5% DPA.

We have more options that might fit your needs, please contact us today to see if this is something that can benefit you!

Happy house hunting!

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Self-Employed? What You Need to Know about Financing a Home in 2020!

Heather Paige Moody


Self-employed borrowers have always had to jump through a few hoops to finance or refinance their homes. Without a traditional paycheck, lenders look for other ways to document income. The COVID-19 pandemic has affected many business owners and delayed tax return filings. As a result, Fannie Mae and Freddie Mac have enacted changes in the way the mortgage industry processes home loan applications (as of June 11, 2020).
Income Verification
Self-employed borrowers are typically verified by the most recent two years of income tax filings. As a result of the pandemic, those two years might not give a current or accurate picture of the borrower’s income. As the borrower is seeking to secure a loan before the next filing period, underwriters are now requiring a signed Profit and Loss Statement (P&L) from these borrowers.
Profit and Loss Statements
As part of the underwriting process, self-employed applicants must provide an audited or self-generated P&L statement for the current 2020 period. The statement must not be older than 60 days and must include:
• Expenses
• Net Income
• Business Depository Account Statements (two most recent)
• Business Revenue
In addition, the borrower must provide their most recent personal bank statements which should support the P&L statement.
Professional Advice
Self-employed loan applicants have always faced challenges when seeking a home loan. Now more than ever, it’s important to understand the requirements and work with a mortgage professional to ensure the loan application is packaged correctly with all the needed documentation. Lenders are still approving home loans, but with these changes put in place to minimize risk as the mortgage industry works through the challenges of this pandemic.

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Do Not Co-Sign a Loan Before You Read This

Heather Paige Moody

Avoid co-signing for someone else’s loan.
A new survey shows that 38% of co-signers lost money because the borrower did not make payments (or make them on time). 28% experienced a decrease in their credit score. And 26% said that their relationship with the borrower disintegrated.
In addition, credit bureaus will add the debt (of the co-signed loan) to your credit report and, in some instances, will count the debt against you if you are applying for a mortgage, a refinance or other types of loans.
Before you agree to co-sign on a loan, consider these other options first.
Co-signing on a car loan.
Think about helping your child or relatives with a larger down payment instead of co-signing for a loan. If you help with a down payment and require that the loan be paid back to you, have the person sign a promissory note and make payments to you to pay off the down payment amount.
If you really do HAVE to co-sign on a car loan, make sure that you are also on the title of the car.
Co-signing on student loans.
On federally guaranteed student loans, co-signers aren’t usually required. Make sure that your child mixes out their government student loans BEFORE turning to private ones.
In regard to student loans from banks or credit unions, check to see if there is a clause that releases the co-signer after the primary borrower makes a certain number of payments on time.
And, if you HAVE to co-sign student loans, have an agreement beforehand that your child will refinance (to remove your name) when they get a job.
Leasing an Apartment.
First-time renters often have trouble leasing an apartment without a co-signer. For a small fee, renters can hire a co-signer through LeaseLock.com or Co-signing.com.
If you have to co-sign, rent payments are generally not reported to the credit bureaus, so it won’t affect your credit score. However, if the renter defaults, the lease is a legal agreement, which could result in a judgment—which would have a huge effect on your credit score.
So, if you are planning to apply for a loan in the near future, do the math and make sure that you can still qualify with the additional “debt” that you become responsible for. Make sure that you also check your credit report every few months to make sure the primary borrower is making the payments on time.
There is an exception to this rule. If the borrower has been making the payments for 6 months to a year and have been making them on time, a lender may ask you for proof (usually cancelled checks or bank statements from the borrower) that the payments have been made by them and not you. They have the option of NOT counting the payment when qualifying you for a loan.

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Are You Ready to Buy or Sell a Home?

Heather Paige Moody

You may not be in the market (yet) to buy another home, but when you do, here are nine things to consider. And if you are selling your home, these things also apply.
Good View = Higher Price: The view really doesn’t matter. It could be a pond. A view of a mountain or valley. The rule of thumb is that you can expect to pay a higher price.
Sold AS IS: Sellers will sometimes negotiate the price or give a dollar concession rather than put the home back on the market and start all over again.
Gated community: It might have a gate—but what does that really mean? Can anyone push a button to open the gate? Or is there a special card or access code to gain entry? If security is an issue, it pays to find out.
Curb appeal: If the yard is neglected, the weeds are taking over or the outside paint job is fading, the inside is usually neglected too. Get a home inspection and be especially careful to look for hidden maintenance items.
Check the area for crime: It’s still about location, location, location! You can get crime stats from your local police or sheriff’s department.
Check out the school system: Same as above. In addition, use the Internet to do some of your own research to compare it to other schools in your area (including private schools).
Don’t buy into the “marketing” fluff: Beware of descriptions such as “cozy, cute, fixer-upper, charming,” etc. Pay more attention to the “facts”!
Lowest price in the neighborhood: This is a red flag because people usually don’t sell at a lower price because they don’t need the money. It’s priced low because of some other issue.
Don’t believe what you read: Remember that the real estate agent is the one who creates the marketing strategies – and it’s all in the way they “perceive” it. So if you are interested in the home, go ahead and view it, but make your own decision. (If you are selling, ask to review the listing information before it is published.)