As a first-time homebuyer, it can be daunting to think that you need to put 20 percent down on your home. The good news is that this is not always the case; there are many programs available that make it possible to put down as little as 3 percent on the home and become a homeowner. The other good news is that there are many programs that provide down payment assistance, helping you to become the homeowner you want to be even when you do not have the capital to put down yourself.
Types of Down Payment Assistance
There are many different levels of down payment assistance programs. Right now there are more than 2,000 programs at the state and local level. The programs touch a large variety of areas, but the most common provide funds for the down payment or the closing costs. Where the programs vary is how the funds are paid back. Some programs work as grants and are not repaid at all, while others require you to pay the funds back if you do not stay in the house for the specified period of time – typically five or ten years, but every program is different.
Every down payment assistance program is different, but many of them do have limitations. These limits usually pertain to your level of income, which varies by area depending on the average income for your area. It can also vary based on the number of people that live in your home. Typically, the lower your income, the better your chances of getting down payment assistance, but it is not unheard of for programs to offer assistance to families with as much as 140 percent of the area’s average income.
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The Sales Price
The sales price of the home might or might not be limited in the down payment assistance programs available in your area. This depends on the cost of living and the amount of home people in your area could afford. Generally, the sales price is not a driving factor in the availability of down payment assistance; instead it is based on what people need, whether it is for a $100,000 house or a $500,000 house.
Assets are Key
The amount of assets you have will definitely play a role in whether or not you are eligible to receive down payment assistance. There is a fine line regarding what you can have – if you do not have enough assets, you cannot contribute to the down payment and closing costs, which most programs require at least a little investment from you. If you have too much though, you will not qualify for the program because you have the assets available to fund the down payment and closing costs yourself.
The down payment assistance programs are a great way to get into a home. The higher your down payment, the lower your monthly payment will be and the lower your payment, the lower your debt ratio, which means the higher your chances are of getting approved. Because there are so many programs out there, make sure to shop around if you do not find one right away. Even if you get turned down for one program, it does not mean there is not another out there for you. Every state and local program offers different benefits and has different requirements. Check with the agencies in your area to see what might be available, either as a loan or as a grant, enabling you to find the program that works for you.Click to See the Latest Mortgage Rates»