Buying a House? Get Down Payment Assistance With These Effective Strategies
Are you planning a house purchase but feel limited when it comes to funding the down payment? You're not alone.
According to a 2019 report by Apartment List, 70% of millennials who want to buy a house say they can't afford to pay the down payment. This is one of the biggest hurdles to home ownership.
If you're struggling to afford the down payment for a house, you can get down payment assistance. There are over 2,500 down payment programs from private lenders and government initiatives to help you put down a home deposit. Below is a guide to get you started on finding down payment assistance for your home purchase.
How Does Down Payment Assistance Work?
Cities, counties, employers, states, and nonprofits are common parties likely to provide down payment assistance. These assistance programs provide prospective homebuyers the funds to partially or fully cover down payments. They take different forms, including:
- Grants
- Zero-interest forgivable loans
- Zero-interest deferred-payment loans
- Low-interest loans
Am I Eligible for Down Payment Assistance?
Majority of down payment assistance programs tend to be inclined toward first-time prospective home buyers. These programs consider a first-time homebuyer as one who hasn't purchased a home in the last three years. However, according to Down Payment Resource, 38% of homeownership programs are accessible to eligible repeat buyers.
This means whether you're a first-time or second-time homeowner, you still have a chance of getting down payment assistance.
Some down payment assistance programs also target specific groups such as teachers, city employees, police officers, etc. However, for general purposes, here are the typical requirements for eligibility for down payment assistance.
- Meet the expected income limits
- Plan the home purchase in an approved location
- Partially fund the down payment from your own pocket (fortunately, this isn't mandatory with all assistance programs).
- Have a reasonably acceptable credit score
- Complete a homebuyer education course
These requirements differ across down payment assistance programs. Make sure that you find a program with requirements that you can easily fulfill.
How and Where to Find Down Payment Assistance Programs
Here is how to apply for down payment assistance once you're ready to buy a home.
- Check the local Housing Financing Authority. Each state has a local HFA providing affordable housing aid to low-income-earning households. Use the National Council of State Housing Agencies' directory to find your state's HFA, then search for available programs.
- Ask around for City and County Programs. Counties and cities usually work with area partners to distribute down payment assistance. Ask your local city or county office to direct you to the application. Other areas where you can find a down payment assistance program include:
- Review program requirements and submit the necessary documents. You may be required to submit:
- Employment history
- Recent tax returns
- Bank statements
- Pay stubs
- Social Security card.
- Submit a mortgage application with an approved lender.
Benefits of Down Payment Assistance
The main advantage of down payment assistance programs is they can help you buy a home with very little cash. You will save money substantially if you get lucky and receive a grant. This type of assistance generally helps you reduce and optimize your home purchase budget as well.
Down payment assistance is a viable alternative to paying out of pocket or breaking all your savings. However, as with any other financial assistance program, down payment assistance has requirements for eligibility. Check with your local housing authority or county to determine if they offer down payment assistance. You can also consult a local realtor for referrals and recommendations on getting the best down payment assistance programs.
