Down Payment Assistance Grant

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Down Payment Assistance Grants

Generally, people who look into a rent to own home programs have bad credit. 

If your credit score is under 600, you have what people in the housing industry refer to as bad credit, but that doesn’t mean you will never own a home. To qualify for a home loan from most lending institutions your credit score has to be at least 620. 

We use a credit repair company that can raise your score instantly and there’s no credit card required.

With most credit repair companies you pay a monthly fee. This fee goes towards the company finding and disputing mistakes on your credit report. 

Once your credit score is above 620 you can apply for a down payment assistance grant worth up to $6,195 to those who qualify!

What is Down Payment Assistance?

Down payment assistance is money given to you to help put a down payment on a home or closing costs as a first-time homebuyer. The amount of this assistance tends to be an equal amount to the percentage of your home’s final purchase price. For example, if the house you are interested in is $350,000 and the down payment percentage is 5%, the amount of assistance would be $17,500. 

A down payment assistance program can come from a local or state housing authority, a nonprofit organization, or from your current lender. The assistance money can be received as a grant, interest-free loan, or debt you pay off in the future. 

Having good credit can help you become eligible, but that eligibility is also determined by income, varying in different states and programs. How much assistance money you are offered also depends on the actual program. Some programs offer a percentage based on a home’s sale price, where others have a certain amount they can offer. 

Types of Down Payment Assistance

Forgivable loans

Forgivable loans are second mortgages that you don’t have to pay back, as long as you stay in a home for a certain amount of years, with a 0% interest.. Most lenders forgive a loan after 5 years, but can even not forgive until after 15 to 20 years. 

If you move out of the home you signed the loan for before 5 years, you will have to repay the loan you borrowed. 

Deferred-Payment Loans

Deferred-payment loans are for when you need a temporary break from making payments on a debt you own, like personal loans. 

These types of loans are a second loan you won’t have to repay until you move, sell, or refinance your first mortgage or pay down your first loan. 

Low-Interest Loans

When a lender might offer you a second mortgage loan at the same time as your first loan. You’ll have to repay each loan monthly, typically at the same time. In doing so, this will hopefully lower your interest on each loan. 

Grants

Among all these different types of down payment assistance forms grants are the most valuable. This is because homeowners aren’t expected to repay this loan (as long as you don’t sell your home in a 5 year period, in some states). Down payment assistance grants were made because these lenders are hoping to grow and improve a certain community’s area. 

But grants aren’t given out to just anyone. They are given out to people who deserve and need the money. When approved a grant you will be given the sum of the median of the area you are looking at. 

For example, the average house in the area you are looking at is between $200,000 to $350,000. You’ll then have to find the median price. To find that you add the lowest and highest number together then divide by two. Here, our median price would be $275,000. The limit DPA grants is 115% of the median price meaning you could get $316,250 in assistance money.

Before looking into any DPA programs here are some terms you should know beforehand:

Fair Isaac Corporation (FICO)

This corporation defines a credit score based on payment history, the current level of indebtedness, types of credit used, length of credit history, and new credit accounts. Scores usually range from 300 to 850. 670 to 739 is considered “good”. 

Debt-to-Income (DTI)

This is a ratio measuring the amount of debt you have to your overall income. Lenders use this as a way to determine your ability to manage monthly payments. 

Housing and Urban Development (HUD)

This is a Federal agency in the executive branch of the U.S. federal government that is responsible for the national policy and programs that address America’s housing needs. This department improves and develops the Nation’s communities while enforcing the fair housing laws. 

Finding DPA programs

Since there are a lot of down payment assistance programs made from charities and organizations throughout different states there is not a standard set of rules. Every DPA program provides different guidelines based on what their state allows. 

Here are some DPA programs throughout the US:

FHA Loans

Federal Housing Administration loans are insured by government agencies. They technically aren’t examples of DPA programs, but they usually allow buyers to provide lower down payments. 

You can buy a home with as little as 3.5% down if your credit score is 580 or higher. If your credit score is 500, a 10% down payment could increase your chance of applying for a home. 

HUD Home Programs

The U.S Department of Housing and Urban Development directly assists Americans who need housing help. HUD sells foreclosed homes to the Federal Housing Administration which then are funded by private lenders.

They offer cases that require no down payment or homes at extreme discounts. They work with programs such as The Good Neighbor Next Door, Section 8 Housing Choice Voucher Program, and Section 184 Indian Home Loan Guarantee Program.

This program isn’t exactly a DPA program, but it does help homebuyers achieve a discounted home with a 3.5% down. 

USDA Loans

These loans are for people who are looking to buy homes in rural or suburban areas provided by the United States Department of Agriculture. To qualify, you can not earn more than 115% of your county’s median income and your property must not be on a working farm. Your home must also be in a zone that is USDA “adequately rural”.

You can buy a home with no down payment with a USDA loan. 

VA Loans

The requirements of a Veteran Affairs loan are if you are a current member of the Armed Forces, a veteran, or a spouse of a deceased service member. Similar to the USDA, you can purchase a home with no down payment. 

Chenoa Fund

Nationwide, except in New York, this loan program provides up to 3.5% DPA. This is determined by a FICO (Fair Isaac Corporation) score of 620 or higher and a DTI (debt-to-income) of 45% or less. 

If your income is less than 115% of your area’s median income and your mortgage payment is 36 months, the mortgage is forgiven. But if you make more than 115% of your area’s median income, the DPA must be repaid. 

Fannie Mae and Freddie Mac

These two names are government-sponsored entities. Fannie Mae funds the HomeReady mortgage where Freddie Mac funds the Home Possible mortgage program. Together they purchase mortgages from lenders, making it possible for low and middle-income families to get a mortgage loan as little as 3% down payment. 

HomePath Homes

Fannie Mae-owned, these homes are offered to the public at a discount through a Fannie Mae-owned mortgage. These homes include low down payments and Home Style renovation loan eligibility as well as closing assistance up to 3% of the home’s purchase price.