Down Payment Assistance Programs Remain a Useful Tool
One of the many hurdles for potential home owners is a down payment. An overall lack of knowledge about the buying process can be challenging as there are many things to consider. There are several tax and credit-related issues that arise during the purchase of a home. This can be particularly daunting for first time home-buyers. One of the common misconceptions is that buyers must have 20 percent down to cover an initial purchase. While this can sometimes be a wise decision, it’s no longer always the case. Regardless, down payment assistance programs remain a useful tool.
What is a Down Payment Assistance Program?
Most everyone understands that the main vehicle secured as a loan from a lender is known as a mortgage. These mortgages come in many shapes and sizes. What that lender is willing to extend a potential buyer depends solely on his or her financial well-being. Does the buyer have decent credit? What is their debt to equity ratio? How many assets do they already possess? While it’s no longer necessary to drop 20 percent on a property, three to five percent cash down can still be too much for many to handle.
This is where assistance programs can come in handy. Assistance programs are specially designed to help with loans that can lower the amount needed for a down payment. Generally, they are available to first time home-buyers.
The American Dream Down Payment Assistance Act of 2003 was designed to help so many families a year realize their dream of home ownership.
These programs are run by various housing authorities and must still be paid off in the future.
How to Qualify for Down Payment Assistance
Like any other grant or loan, there are certain strings attached to down payment assistance programs.
Depending on the type of assistance, borrowers may be required to live in the home as the primary residence for a certain amount of time. Likewise, if the home is sold, the loan would have to be repaid.
Thankfully, many assistance loans of this nature are interest-free and aren’t due until the mortgage is finally paid off.
First-time Home Buyers
First-time home buyers who are short on assets should consult a broker or lender before securing down payment assistance. However, it could very well turn out to be the difference between getting that first home and remaining a renter.