Home Buyer Down Payment Assistance Programs

Don’t let the lack of a down payment stop you from becoming a homeowner.  With mortgage rates at historic lows, why not take advantage of this market and purchase a home! Here’s how a home buyer down payment assistance program may help you in achieving the American Dream.

So what is Down Payment Assistance?

DPA helps home buyers with grants and low interest loans that help reduce the amount of money needed to save for a down payment. It’s essentially the “money” to help a home buyer get into a home and can come from federal, state or local agencies, as well as non-profits and employers.

What types for DPA programs are available?

There are all types of programs available.  Some, like Grants, do not have to be repaid.  However, grants only make up a small percentage of what is available.  Other types of programs are considered loans and have deferred payments or are forgiven after a set amount of years.  It all depends on which program you choose.  You can also look  to use some loan programs with other down payment assistance programs as long as you qualify.

FHA Loan

An FHA loan is a loan insured by the Federal Housing Administration, and helps borrowers with lower credit scores or little down payment. This type of loan is usually chosen because it allows a borrower to put as little as 3.5% down and offers more lenient credit and debt-to-income requirements.  Because a small down payment is usually associated with these types of loans, you’ll need government-provided mortgage insurance (MI).  However, to compensate, lenders often offer FHA loans at attractive interest rates.

USDA Loan

The USDA loan is a loan program guaranteed by the U.S. Department of Agriculture with low interest mortgages designed for lower-income borrowers who wish to live in eligible rural areas. USDA loans offer low to no down payments.  There are income requirements for USDA loans and because they require low down payments, you’ll need to take out mortgage insurance (MI).

VA Loan

A VA loan program is a US Department of Veterans Affairs backed loan for active-duty military personnel, veterans and some spouses/widows. In addition to lower interest rates and minimal closing costs, the most distinct advantage of a VA loan is that it requires NO down payment and NO private mortgage insurance. Credit scores are important, however minimum requirements usually lead to a good interest rate.

Good Neighbor Next Door

The Good Neighbor Next Door is a HUD program that provides a 50% discount on a home’s list price in revitalization areas (designated by HUD) for law enforcement officers, firefighters, emergency medical technicians and pre-kindergarten through 12th-grade teachers.  There are eligibility requirements and the program is highly competitive. For public service professionals first-time home buyers, the program also offers benefits and grants. In return, home buyers must commit to live in the property for 36 months as the sole residence.

HomePath ReadyBuyer Program

For those first-time home buyers who don’t have a lot of money for closing costs and are wanting to purchase foreclosed Fannie Mae property, this program provides up to 3% in closing-cost assistance.  Before making the offer, buyers are required to complete an online first-time buyer education course.

FHA Section 203K

The FHA Section 203K loan is great for those wanting to purchase a home that needs major improvements but don’t have a lot of cash to do so.  This FHA-backed loan lets you roll the costs on the renovations into your primary mortgage. The down payment on these loans is as low as 3.5% but the cost of the improvements must be more than $5000.

Texas State Affordable Housing Corporation Programs (TSAHC)

TSAHC is a non-profit organization created to provide mortgage loans and down payment assistance grants for low-income families and other under-served populations who would not qualify through conventional financial channels. These programs offer 30-year fixed interest rate mortgages, down payment assistance as either a grant or 0% interest, no monthly payments due second lien, and is available statewide. TSAHC offers two first-time home buyer grant programs:

Homes for Texas Heroes Home Loan Program: Designed for teachers, fire fighters and EMS personnel, police and correctional officers, and veterans.

Homes Sweet Texas Home Loan Program: Designed for Texas home buyers with low and moderate incomes.

First-time home buyers that are eligible for either of these two programs can also qualify for Mortgage Credit Certificates – mortgage interest tax credit that lowers the federal income tax amount you would pay every year.

We’ve helped countless first-time home buyers purchase homes over the years. We understand the challenges and obstacles that come along in the home buying process. We pride ourselves on guiding our clients through the entire home purchase with understanding, knowledge and care. 

Contact us today if you’d like more information on how to purchase your first home!