In the Down Payment Resource database, the latest Homeownership Program Index (HPI) for Q2 2021 shows that Down Payment Assistance (DPA) programs make up a whopping 73%. These programs are available nationwide and offered by various government agencies, nonprofits, and employers.
They can take the form of a second mortgage loan or a non-repayable grant, providing flexibility to income- and credit-qualified buyers. According to Rob Chrane, CEO of Down Payment Resource, buyers should talk to their loan officer and real estate agent to choose the best program for their needs.
Whether it’s a grant or a forgivable loan, DPA can make a huge difference for those ready to take the leap into homeownership.
Exploring Repayable Down Payment Assistance Programs for Homebuyers
Repayable down payment assistance programs come in different forms but usually involve a 0% interest second mortgage. Some have interest or amortizing loans, and repayment terms range from 5 to 30 years.
A soft second option lets you delay payment for a while. Take the GC97 Freddie Mac HFA Advantage Program, for example. It offers up to $7,500 with a 15-year term and the same interest rate as your first mortgage. Just be aware that some programs may have a partial balloon payment at the end of the second mortgage term.
Discover the Benefits and Risks of Silent Second and Deferred Loans for Your Down Payment
Did you know that almost two-thirds of down payment programs are silent seconds or deferred loans? These loans postpone payments if you sell the property, refinance, rent it, or shift somewhere else. It’s great for buyers who plan to live in the home for a while and benefit from its appreciation in value. But be aware of the potential taxable event when you sell, refinance, or move out.
An example is the Florida Housing Finance Corporation Florida Assist program which offers up to $10,000 for Government loans and up to $7,500 for Conventional Loans. Payments are deferred, but the loan will be due upon certain events. Therefore, plan accordingly.
A Helpful Option for First-Time Homebuyers
Forgivable second mortgage programs account for almost half of all down payment programs. These programs forgive some or all of the original down payment assistance amount over time as long as the program’s conditions are met. One example is the New Mexico Mortgage Finance Authority HOMENow Program offers first-time buyers up to 8% of the sales price or $8,000 with a zero percent interest rate.
The best part? If you fulfill the program’s requirements, the loan is forgiven after ten years! However, you may have to repay the loan with interest if you don’t meet the conditions. So, if you’re a first-time buyer, consider exploring forgivable second mortgage programs to help with your down payment and closing costs. However, don’t forget to read and understand the program’s requirements before signing up.
How to Score Free Money for Your Home: The Benefits of Grant Programs
Grant programs are a homebuyer’s best friend. Why? Because they’re like gifts that keep on giving! Unlike loans, grants don’t have to be paid back and won’t put a lien on your property. They’re essentially free money that can cover your down payment or closing costs and even give you instant equity.
And if you’re a military or veteran homebuyer, the PenFed Foundation Dream Makers Grant is an amazing option. It’s a national program that matches your funds 2-to-1, up to $5,000. So, take advantage of these grants and make your dream home a reality!
Homeownership Program Index (HPI) Data on Various Types of Housing Assistance Programs
|Down Payment/Closing Cost Assistance (DPA)||73%|
|– Payment Deferral||64%|
|– Both Deferred and Forgivable||38%|
|Additional Programs (Matched Savings, HCV)||11%|
|Mortgage Credit Certificates (MCCs)||5%|
Key Findings on Down Payment Assistance Programs in the Housing Market
|Other HPI Findings to Note||Percentage|
|Programs temporarily suspended due to pandemic||0.9% (-0.7%)|
|Homeownership programs available to eligible repeat homebuyers||38%|
|Programs available in a specific local area||74%|
|Programs available statewide through state housing finance agencies||26%|
|Programs allowing buyers to purchase a multi-family property||26%|
|Programs allowing manufactured housing as an eligible property type||26%|
|Programs available for community service workers||>8%|
|Programs with benefits for veterans, military, and surviving spouses||12%|
|States with the greatest number of down payment programs||California, Florida, Texas|
Should You Apply for a Down Payment Assistance Program?
Struggling to save up for a down payment on your dream home? Down payment assistance programs can help make homeownership affordable for you! Discover the various options available and choose the perfect program for you.