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Some borrowers worry about the down payment for their home loan. It can feel daunting to save that much money over time if you’ve never tried before, but there is help available for qualifying applicants in the form of down payment assistance.

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Types of Down Payment Assistance

December 16, 2021

Types of Down Payment Assistance
Some borrowers worry about the down payment for their home loan. It can feel daunting to save that much money over time if you’ve never tried before, but there is help available for qualifying applicants in the form of down payment assistance.

This help does not come from the federal government in the form of an FHA loan or FHA grant for the down payment, but rather from state or local agencies offering down payment assistance programs offered in your area.

These programs are offered to low- to moderate-income applicants and are designed to help people find affordable homes.

These programs are not standardized, so much will depend on the state offering the program and whether or not you have owned property recently. These programs do not necessarily limit their help to first-time buyers.

Some state programs recognize those who have not owned property in the last three years as being eligible the same as a first-time homebuyer who has never owned a home before.
Do not count yourself out of consideration for these down payment programs just because you owned property in the past.

Typically, a down payment grant may be offered to you on a conditional basis--one common condition is being required to use the home as your primary residence and for a minimum amount of time. In such cases, if you don’t live in the home as your main address for the specified time period you may be required to repay some or all of the down payment grant.

What kinds of down payment help is available? Some or all of the following depending on the state:
 
  • Down payment grants
  • Down payment loans
  • Closing cost grants
  • Closing cost loans
Down payment grants are offered with no expectation of repayment, and down payment loans may be offered as a “silent second” or second mortgage loan specifically to cover down payment and closing costs (depending on the program). These loans may be listed as “forgivable” if the borrower meets program requirements like a minimum occupancy time similar to what’s mentioned above.

In general, both grants and loans may be considered repayable if the borrower does not adhere to the terms of the program which may include an occupancy requirement.

Some state-level down payment assistance programs may offer either a grant that covers both down payment and closing costs or they may offer separate grants for closing costs. Grants generally are not meant to be repaid but may, like down payment grants, feature minimum occupancy requirements and other restrictions.

You may also be offered the option of a closing cost loan which may or may not be forgivable depending on the terms of the program. Such programs may feature need-based requirements such as income limits, purchase price caps, and more. But not all do.

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