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If you are considering an FHA mortgage but need down payment help, there are programs offered by state and local agencies that may be able to help. Not all of them meet FHA loan guidelines--you’ll need to make sure that the program you choose meets the sourcing requirements for the money.

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Five Important Down Payment Assistance Tips

February 4, 2022

Five Important Down Payment Assistance Tips
If you are considering an FHA mortgage but need down payment help, there are programs offered by state and local agencies that may be able to help. Not all down payment assistance meets FHA loan guidelines--you’ll need to make sure that whatever the source of your down payment assistance, you meet the sourcing requirements for the money.

1) Sourcing Counts-Be Sure!

That means having a clear paper trail from the person providing your down payment assistance showing where the money has come from, and where it has been since it was provided to you.
 
This is to make sure the money does not come from a prohibited source like the seller of the property, and to make sure it does not come from non-collateralized loans like pink slip loans or payday loans.

There are other issues--here are some tips that can help you find the right kind of down payment help you need.

Check Your State Government Official Site for Down Payment Programs

Most states offer some kind of home purchase or homeownership program that may include down payment help in the form of grants, second mortgages, or loans that wind up being forgivable after a specific amount of time has passed. Check your state government official site to find these programs under “Services”, or sections offering information about living in the state. You may also have good luck searching with the phrase “(your state here) home loan programs + DPA or +downpayment assistance.

Be Sure You Know the Rules

Some states advertise their down payment assistance as being aimed at first-time home buyers. Some give up and go away after learning that, not realizing that a large number of programs offer down payment assistance to those who have not owned a primary residence within the last three years. These borrowers may qualify as first-time buyers under such programs. Be sure to ask!

Know The Terms of Your Down Payment Assistance

Some down payment help comes in the form of a non-repayable grant. Other assistance comes in the form of a second mortgage that may be forgivable if you stay in the home a certain length of time. And other down payment help is a loan which must be repaid. Know the terms and conditions of your program before you commit.

Know Your Options

Some down payment assistance programs feature choices--some might qualify for one kind of help but not another, often due to income caps or purchase price limits on the transaction as a condition of getting a down payment grant or loan. Know what the restrictions might be on your program--not all are alike--and what you may have to do in order to qualify for the best mortgage rates, the lowest down payment, etc.

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