First Time Home Buyers and Down Payment Assistance Programs

Website design By BotEap.comMay 27, 2010 Down Payment Assistance (DPA) Programs for First Time Homebuyers By: Michael A. Foote, CMB

Website design By BotEap.comThere is money available for first time homebuyers today. In a much-needed addition to the financing products available today, down payment assistance programs are once again available. Down Payment Assistance Programs are generally a federal, state, or local bond or grant program designed to help certain people at certain income levels in certain areas with money that can be used for a down payment and closing on many purchase loans.

Website design By BotEap.comThese tax-free grants or loans are generally forgivable as long as the buyer remains in the home for a designated period of time. And these dollars can dramatically change the amount of money required at closing when these first-time homebuyers purchase a home. For example, a typical FHA borrower may need to put up more than 4-7% of the total sales price, while a borrower with a WISH down payment assistance program may only need to put up a total of 2-7%. 3 %. That’s a lot of money in a transaction of several hundred thousand dollars. If you write off that difference, the savings are literally tens of thousands of dollars, since most of the closing costs are financed by the new mortgage.

Website design By BotEap.comSo what does the process look like with “DPA” compared to the regular loan process? Frankly, it seems less for the user to the extent that the lender will usually have to deal with the additional hoops during the process. For the borrower/buyer they probably won’t notice the difference. The only real difference is the possibility of a slightly longer loan processing time. So is DPA a good idea? Well lately it’s been a challenge for real estate agents to get clients to use FHA let alone FHA WITH down payment assistance so it could be argued that using DPA in an offer to purchase could be a determining factor for the seller’s side when choosing the offer. to open the escrow with. The only cure for this pitfall will have to be more products on the market for properties up to the $400,000 range, as DPAs generally serve no purpose and no qualified borrowers as sales price rises and/or in high per capita income areas. capita. DPA certainly has a place in today’s financial landscape and those in the industry are happy to have it, it is one more tool to increase homeownership for low to middle income families. And this product will help sell the predicted hidden inventory rumored to be lurking around the corner.

Website design By BotEap.comOnly time will tell if that comes to fruition or not. These programs are not free from abuse, there have been DPA related scams in the past and officials, lenders and large institutions have actually reduced what is allowed as a DPA. The economy also influences the availability of these at all times. There are many DPAs completely depleted of funds.