Mortgage down payment assistance can come in the form of a grant, a tax credit, a second mortgage, or an interest-free silent mortgage that you don’t pay back until you sell the house or pay off the first mortgage.
How Much Assistance Can You Get?
The average down payment assistance ranges between $5,000 and $20,000, depending on the program and the state. If you live in one of the highest cost areas of the country, like San Francisco or New York, you can get up to $100,000.
The dollar amount you receive is based on the size of your household, the price of your home, and the investment you’re able to make. So a family of five will qualify for more assistance than an individual person.
What Are the Requirements?
- You must make no more than 120% of median area income. In high-cost areas, some grant programs will issue assistance to people making up to 140% of median area income.
- The home must be valued within the median price range for your location (between $250,000 and $700,000 depending on your area).
- You must plan to live in the home.
- You must meet the minimum credit score requirement for the lender.
- You must qualify for a first mortgage.
- You must have the lender-specified amount of cash reserves.
- You must be making an investment in the property. The level of that investment varies from lender to lender.
- You must complete a homebuyer education course.
- Most down payment assistance is given to people buying single-family homes, but it’s available if you’re purchasing a multi-unit building (up to four units) in which you plan to live.
63% of down payment assistance programs are reserved for first-time buyers and 14% are specifically for community heroes. So if you are an educator, police officer, firefighter, military officer or veteran (to name a few), you could be eligible for down payment assistance.
Where Can You Find These Lenders?
The majority of assistance programs are run by state housing agencies, but many city and county housing authorities and non-profits also issue loans and grants.
Many of the mortgage down payment assistance programs are designed to work with loans insured by the Federal Housing Administration (FHA). If you are planning to apply for an FHA loan, ask the loan officer for their preferred assistance programs. If you’re applying for a conventional mortgage, fear not, there are assistance programs that can work for you as well.
Since the assistance programs typically partner with specific lenders, it’s best to get a recommendation from your first mortgage lender.
When families aren’t able to get assistance from their loved ones, non-profits and state and local governments can step in to provide access to homeownership. You’ll have to meet the lender’s or grantor’s specific requirements, and it might delay the purchase process, but at the end of the day, you’ll have a piece of the American Dream.