Down Payment Assistance Programs For First Time Homebuyers

Congratulations on your decision to become a home owner!

Whether this is your first home or you have not purchased a home in the past 3 years – you may qualify for a first-time buyer program or a down-payment assistance program.

Requirements vary from state to state for down payment assistance but most commonly the assistance comes from government-subsidized programs and non-profit charitable organizations.

These programs are nationwide as well as specific state-by-state programs. Downpayment assistance for home buying can target low-income families or middle-income families.

The definition of a first-time buyer for a majority of the programs means you could not have purchased a home in the previous 3 years. It does not mean that you are barred if you have purchased homes in the past and are currently a homeowner.

What is Down Payment Assistance

Down payment assistance provides funds for a portion of down payment costs or closing costs in the form of grants or loans. The programs are typically administered through state and local entities. Grants are gifts that do not require repayment. Down payment assistance that comes in the form of loans might require repayment.

Here are the major types of Down Payment Assistance:

  • Grants that never have to be repaid as they are considered gifts.
  • Low-interest second mortgage loan that must be paid along with your main mortgage.
  • Zero-interest second mortgage loan with deferred payments that must be paid only if you sell or refinance.
  • Zero-interest second mortgage loan that is forgiven after a set number of years unless you sell or refinance.

Down payment assistance that comes in the form of a second mortgage loan typically have lower rates than your first mortgage.

The majority of downpayment assistance programs will require you to live in the home. Each program will have its own guidelines and not all borrowers will qualify.

Hud.gov Homeownership Programs by State

Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico/U.S. Virgin Islands
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming

5 Nationwide Homeownership Programs

1. Nehemiah Program

Nehemiah is the nation’s largest privately funded down payment Provide Gift funds up to 6% of the final contract sales towards your downpayment and/or closing costs.

  • Provide Gift funds for both first time and repeat homebuyers.
  • Provide Gift funds for both new construction and resale homes.
  • There is no repayment of gift money.
  • There are no income or asset limits.
  • No geographical restrictions.

2. Bank of America Downpayment Assistance Programs

The Bank of America Community Homeownership Commitment™ program provides several options for modest-income and first-time homebuyers, including affordable mortgages, grant programs, and resources. The amount offered depends on the state where you are purchasing. Not all programs are available in each state.

Click the “Find a Program” button on BofA’s site to find out what programs are available in your state. It’s worth the time to research because some states offer much more in assistance depending on the city or county where you plan to purchase.

  • Up to $7,500 closing cost help.
  • Up to $10,000 in down payment help.
  • Homebuyer grants.
  • Homebuyer education.

3. Chenoa Fund

The Chenoa Fund offers up to 3.5% down payment assistance in the form of a second mortgage with no interest and no payments. If your income is less than 115% of your area’s median income, and you make your mortgage payment on time for 36 months, the mortgage is forgiven. If you make more than 115% of your area’s median income, the DPA must be repaid. The Chenoa Fund is administered by CBC Mortgage Agency (CBCMA), a federally chartered government entity.

  • Must have a FICO® Score of 620 or higher.
  • Applicants’ income must be less than or equal to 115% AMI (area median income).
  • Only offered for single-family and two-unit properties
  • If you make a late mortgage payment, you’ll be given a second chance at loan forgiveness.

4. American Dream Downpayment Assistance Initiative

The American Dream Downpayment Assistance Initiative program has been around since 2004. It provides grants to help home buyers with downpayment and closing costs. The program assists first-time homebuyers, low and moderate income individuals, and families. Highlights of the program:

  • Grant recipients must be first time home buyers with annual incomes that do not exceed 80 percent of the area median income.
  • A maximum down-payment grant of $10,000 or 6% of the purchase price of the home, whichever is greater. The average subsidy is approximately $7,500.
  • The grants help to defray the upfront costs of purchasing a first home and can also be used to offset the costs of rehabilitating the property.
  • Grants may be used to purchase one-to-four family home units, condominium unit, cooperative unit, or manufactured housing.

5. HomePath Homes

HomePath Homes offers closing cost assistance – up to 3% of the home’s purchase price to first-time home buyers – but there are restrictions. You must purchase a HomePath home to get the closing costs assistance. HomePath homes are foreclosures (single-family, multi-family, condominiums) owned by Fannie Mae. You can search for HomePath property at an online database.

  • Buyers must complete HomePath’s online training course and receive the official Certificate of Completion.
  • The request for closing cost assistance must be made at the initial offer in the HomePath Online Offers system.
  • The closing cost assistance offer may be adjusted during contract negotiations.
  • Buyers with total closing costs under 3% will not receive the difference as a credit.
  • Buyers must be a first-time Homebuyer (did not own a property in the past three years).
  • Buyers must reside in the property as their primary residence within 60 days of closing.
  • The property must be listed on Homepath.com and be eligible for the closing cost assistance.

There are so many assistance programs it’s important to thoroughly research. A good place to start researching is your state’s housing finance agency and your city/county resources.  For example, the state of California offers several programs through the California Housing Finance Agency. But that’s only one resource. The County of Los Angeles offers up to 20% of down payment assistance (not to exceed $75,000) for first-time homebuyers through the Los Angeles County Development Authority.

The state of Texas offers multiple first-time homebuyer grants and loans. 

What mortgages can be used with down payment assistance?

Most down payment assistance programs require applicants to get a mortgage loan from an approved participating lender. That’s just the way it works. However, there are pros to this requirement in that down payment assistance programs often include the most popular loan programs, like:

  • FHA loans (backed by the Federal Housing Administration.
  • VA loans (backed by the Department of Veterans Affairs).
  • USDA loans (backed by the U.S. Department of Agriculture).

Program tp purchase property without a down payment

The Neighborhood Assistance Corporation of America (NACA) is a unique home buying program that caters to people who have “neither perfect credit nor substantial savings.

The best feature of NACA’s home buying program is no down payment, closing costs or fees required. The lender pays closing costs.

Plus the NACA’s interest rates are below market 30-year fixed-rate with the option to buy-down to nearly 0%.

Currently, NACA’s rate is 2.75% APR for a 30-year term and 2.125% APR for a 15-year term.

Features of NACA’s mortgage product:

  • No down payment, closing costs or fees
  • Below market fixed-rate with option to buy-down to nearly 0%
  • Perfect credit, high income or savings are not required
  • Member or anyone in the household cannot own another property when they close on the NACA mortgage.
  • Member must occupy the home as long as they have a mortgage obtained through NACA.
  • Members need to participate in whatever way they feel comfortable.
  • Members must adhere to NACA’s policies and procedures.
  • Properties may include single or multi-family owner-occupied principal residences (condos, co-ops, or mixed-use buildings).

NACA can help homebuyers that lack sufficient downpayment and closing costs and have less than perfect credit.

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