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
Nationwide Homeownership Programs
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.
National Homebuyers Fund, Inc.
The National Homebuyers Fund, Inc. program is available in most U.S. states with flexible qualifying guidelines. The assistance may be forgiven immediately, after a short period of years, or have repayment requirements, depending on the Program that may include:
- DPA is available up to 5% of the mortgage loan amount
- Assistance can be used towards down payment and/or closing costs
- There is no requirement that a borrower be a first-time homebuyer to qualify
- FICO score requirements and allowable debt-to-income ratios are flexible
- DPA programs features generous income limits; higher than might be expected
- FHA, VA, USDA and Conventional Mortgage Loan financing is available
- DPA is available for both purchase and refinance of a primary residence
- Sponsored by NHF and available nationally through Participating Lenders
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.
- America’s Home Grant® program offers a lender credit of up to $7,500.
- Down Payment Grant program offers a grant of up to 3% of the home purchase price, up to $10,000, to be used for a down payment in select markets.
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 to 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.
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.
