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Prev Next Simon Potter/Getty Images 6 min read Published May 24, 2022 CheckmarkExpert verified Bankrate logoHow is this page expert verified? At Bankrate, we take the accuracy of our content seriously. “Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. About our Review BoardWritten by Meeghan Truelove Written by Meeghan Truelove Meeghan Truelove Edited by Suzanne De Vita Edited by Suzanne De VitaArrow RightMortgage editor Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Suzanne De Vita Reviewed by Jeffrey Beal Reviewed by Jeffrey BealArrow RightPresident, Real Estate Solutions Jeffrey L. Beal, president of Real Estate Solutions, has 40 years' experience in multiple phases of the real estate industry. Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. You probably think you need to have a big down payment socked away in the bank in order to buy a house. That’s not necessarily true, as there are literally thousands of programs that will help you come up with a down payment so you can land the home of your dreams. Down payment assistance programs are widely available, and they are easier to qualify for than you might think. For a sizable number of people who have good jobs, steady income and decent credit but lack the cash for a down payment, they provide a viable route to homeownership. LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace. How Does LendingTree Get Paid?How Does LendingTree Get Paid?LendingTree is compensated by companies on this site and this compensation may impact how and where offers appears on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace. Down Payment Assistance: What It Is and How to Get ItWritten by Denny Ceizyk Edited by Rebecca McCracken Updated on: July 6th, 2022Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It may not have been reviewed, commissioned or otherwise endorsed by any of our network partners. If you’re ready to become a homeowner, but don’t have enough cash in the bank for a down payment, there’s good news: You may qualify for down payment assistance grants and loans. Known as DPAs, these programs are available from the federal government, approved banks and nonprofit housing agencies. Learn how down payment assistance programs work and determine if you’re eligible for money to help you buy a home sooner than later. On this page
What is down payment assistance?Down payment assistance is money that’s made available to consumers to help them cover the upfront cash required by a lender to buy a home. The funds typically come from federal and state housing agencies, banks and local nonprofit housing authorities in the form of grants or low- or no-interest rate loans. Some important things to know about down payment assistance loans:
The U.S. Department of Housing and Urban Development (HUD) provides funding for and information about many of the DPA programs offered across the country. How does down payment assistance work?The process for getting down payment assistance varies depending on the program you apply for. However, you’ll need to qualify for a mortgage regardless of which DPA program you choose. That means you’ll need to:
Types of down payment assistance programsMost down payment assistance programs are offered as grants or second mortgages. The terms and conditions vary, so make sure you understand the restrictions in the fine print. GrantsA grant is money that doesn’t have to be repaid. First-time homebuyer grants are usually offered through state or local municipalities. Some programs charge higher interest rates on the mortgage to cover the cost of the grants. Second mortgagesSome first-time homebuyer programs record a lien on your home in addition to the mortgage you take out to buy a home, which means you’ll have two mortgages on your home — one for the down payment assistance and one for the rest of your home purchase. It’s called a “second mortgage” because it’s placed behind your first mortgage, similar to a home equity loan or home equity line of credit (HELOC). In some cases you’ll make regular payments of principal and interest with stable payments for a set term at a fixed rate, just like you would with a home equity loan. Other DPA second mortgages may be deferred or forgivable, but come with restrictions on how long you have to live in the home to avoid repaying the assistance. There are two terms worth knowing to avoid surprises down the road if you try to sell or refinance your home, recapture and silent second. Recapture. This term refers to whether you have to repay the assistance if you sell or refinance your home. The amount you have to pay back usually drops the longer you’ve owned your home. Silent second. A “silent” second is a lien recorded on your home equal to the amount of the down payment assistance you’re approved for. It usually doesn’t have to be repaid. However, the lien is not released until you’ve owned the home for a set time, and you could end up paying a portion of the assistance back if you try to refi or sell the home before then. How to qualify for down payment assistanceIn addition to meeting the minimum requirements set for the first mortgage, there may additional eligibility guidelines that may include:
How to find down payment assistance near you
How much down payment assistance can I get?The amount you can qualify for depends on the DPA program you apply for. For example, in Arizona, the Pima Tucson Homebuyer’s Solution Program limits assistance to 2.5% to 6% of your sales price, compared to the Pima County/City of Tucson DPA program, which provides assistance up to 10% of the contract sales price. You can also check the HUD local homebuying programs site to get details about the programs available in your state. Frequently asked questionsWhat’s a normal down payment on a house?According to the National Association of Realtors, the average down payment for first-time homebuyers has ranged between 6% and 7%. How long does it take to get down payment assistance?The time will vary depending on the program. Pay close attention to homebuyer education programs — many require you to complete the course before applying for any DPA programs. Does a mortgage credit certificate help with my down payment?No. A mortgage credit certificate (MCC) allows homeowners to take their mortgage interest deduction monthly instead of at tax time. Check with your state housing agency to see if any MCC programs exist. Can I also get help with closing costs?Yes. In addition to down payment assistance programs, some housing finance agencies also offer assistance with closing costs. Income and neighborhood restrictions are similar to DPA programs. How can I get money for a downpayment?5 ways to borrow money for a down payment. Take out a HELOC or home equity loan. ... . Get a loan from a friend of family member. ... . Tap your retirement savings. ... . Get a bridge loan. ... . Explore down payment assistance programs.. How can I get approved for no money down?There are currently two types of government-sponsored loans that allow you to buy a home without a down payment: VA loans and USDA loans. Each loan has a very specific set of criteria you need to meet in order to qualify for a zero-down mortgage.
What is the best program for first1. FHA loan. FHA loans are backed by the Federal Housing Administration and are considered more secure than conventional loans because they are backed by the US government. They're one of the easiest mortgages to get approved for if you're a first-time homebuyer with a low credit score and minimal down payment savings.
What is the best down payment?A 20% down payment is widely considered the ideal down payment amount for most loan types and lenders. If you're able to put 20% down on your home, you'll reap a few key benefits.
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