Did you know that the average homeowner can save $17,766 through a down payment assistance program? Buying a new home can be stressful, especially for a first-time homeowner.
You have to worry about finding the right home, financing, and the down payment. Are you currently worried about how you will afford the down payment on a new home? Luckily, there are programs in place to help you with the downpayment.
If you want to buy a home but can’t afford the downpayment, keep reading to learn more about down payment assistance programs!
What Is Down Payment Assistance?
Buying a new home requires you to make a downpayment. This downpayment is based on a percentage of the total cost of the home.
The amount you have to pay will depend on the price, your credit score, and the lender but on average, expect to put down anywhere from 5-20%.
If you don’t have that much money saved, you may be able to take advantage of a down payment assistance program. These programs offer you a grant or loan to cover the cost of the downpayment.
You can find down payment assistance programs all across the United States. There are different ones available on state, county, and local levels.
Do You Quality for Down Payment Assistance?
If you are a first-time homeowner, you are the perfect candidate for down payment assistance. These programs were designed with first-time homeowners in mind. If this isn’t your first home, you may still qualify if you haven’t owned a home in over three years.
Because there are thousands of different down payment assistance programs, the requirements vary per program. There could be other qualifications for specific programs, such as income.
Types of Down Payment Assistance
Now that you know what down payment assistance is and who qualifies, it is time to review the different types. Down payment assistance usually comes in the form of a loan or a grant.
Grants are the best type of down payment assistance because you never have to repay the money. They are essentially free money! If you can qualify for grants, that is the best way to go.
Forgivable loans are loans that can be forgiven as long as you are in the house for a certain amount of time. This type of loan typically has a 0% interest rate, so you don’t have to pay them unless you sell the home within the given time.
If you qualify for a forgivable loan, you can expect the period to be anywhere from 5 to 20 years. This type of loan works best if you know you want to live in the house long-term.
If you don’t have enough money to afford a down payment, another option could be a low-interest loan. This is a second loan, on top of your mortgage payment, to help you cover the cost of the down payment.
Low-interest loans require repayment, but they are at a lower interest rate than other types of loans. You may find some lenders that offer no interest.
Another type of loan to help cover the down payment of your new home is deferred payment loans. They cover the cost of the downpayment and do not have to be repaid unless you sell your house.
One of the best things about deferred payment loans is that they are easy to pay when you sell your house. All you have to do is apply the funds from the sale to the loan.
How to Find Down Payment Assistance
Because down payment assistance programs are offered by states, counties, cities, and even charities, the best way to find a program will be to search for ones near you.
In addition to looking for programs near you, you should also read this to learn more about the American Dream Grant.
Once you find a good program, they will need to run a credit and a background check. After you get approved, you may have to attend classes on having a mortgage.
What Type of Mortgages Work With Down Payment Assistance?
Do you want to apply for down payment assistance but are worried that it won’t work with your mortgage type? If so, don’t worry. Down payment assistance programs work with almost all types of mortgages.
The most common types of mortgage loans are FHA loans, VA loans, and USDA loans. These loans should all work well with down payment assistance programs.
If you are planning to use a conventional loan mortgage, meaning that it is not backed by the government, it should qualify as well.
Of course, the type of loans that qualify will also depend on the program and its specific requirements.
How Long Does It Take to Get Down Payment Assistance?
If you want to purchase your home quickly, you are probably wondering how long it takes to get down payment assistance. The amount of time it will take will depend on the program.
While some programs may take a short amount of time, others will take a long time. It will depend on the size of the down payment assistance program, how many people are applying, and how close the program is to you.
If you decide to use down payment assistance, it may take longer to buy your home. While down payment assistance is incredibly helpful, it does add another step to the long home-buying process.
Stop Renting, Start Owning
If you are finally ready to stop renting an apartment and dive into the world of homeownership, consider applying for a down payment assistance program. These programs can help you cover the cost of the down payment.
Did you enjoy reading this article on down payment assistance? If so, check out our home category for more advice on owning a home!