For many, a down payment seems like the biggest obstacle in achieving their dreams of owning homes. Saving up to 20% of a home’s price in cash can seem like an insurmountable goal, especially with today’s rising home prices. But that’s not the only way to come up with a needed down payment. Let’s look at some of the common options for down payment assistance
The Forms of Down Payment Assistance
Assistance with down payments can come from loans, grants, or a variety of programs. These vary by state and involve different government agencies, nonprofit organizations, and others. And the number of down payment programs across the U.S. is considerable — between 2,000 and 2,500. By category, they include:
- Grants. This is money that is gifted to the homebuyer with no expectation of repayment. For example, the Housing Finance Agencies in a number of states offer grants such as 3% to 5% of a home’s purchase price.
- Forgivable Zero-Interest Loans. Often called soft second mortgages, these no-interest loans are usually forgiven after a certain period. Five years is common. As just one example, Pennsylvania’s Housing Finance Agency has a HOMEstead program that offers no-interest down payment loans up to $10,000, which are forgiven over five years at a rate of 20% per year.
- Deferred-Payment Loans. Another type of soft second mortgage, these loans defer repayment, usually until the home is sold, refinanced, or paid off at the end of the mortgage term. For example, the Florida Housing Finance Corporation offers deferred interest-free second mortgages for up to $7,500.
- Low-Interest Loans. Also known as second mortgages, they work much in the same way traditional mortgage loans do; these low-interest loans for down payments are usually paid back monthly. But at a lower interest rate. Connecticut, for example, offers second mortgage loans at 1% interest through its Housing Finance Authority.
How do you know if you qualify for down payment assistance?
With thousands of assistance programs and tens of thousands of rules and requirements governing these programs, that can be a tricky question to answer. Sometimes eligibility is based on location, income, first time homebuyer status, profession, or other factors. Luckily, you can rely on the experts at Luxury Mortgage to help you examine your options and cut through the red tape.
Are you ready to hear about how you might be able to get help with a down payment, clearing away that obstacle to homeownership? Contact one of our lending specialists today.
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