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Down Payment Assistance (DPA): Thousands Of Dollars In Help For Your Home Down Payment. Up To $100K!
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Down Payment Assistance (DPA): Thousands Of Dollars In Help For Your Home Down Payment. Up To $100K!
Down payment has proven time and again to be the most challenging barrier to home ownership.
DPAs cut that burden for those homebuyers otherwise qualified but who are still short on savings to meet mortgage market to finalize the purchase.
There are DPA programs in all 50 states and territories
Down Payment Assistance (DPAs) are funds created by government and public entities with the designated purpose to subsidize down payments, generally in the form of 2nd mortgages loans to the low-and-mid-income (LMI) homebuyers’ community and help them with down payment and/or closing costs when buying a house.
It is worth repeating: There are down payment assistance programs in all 50 states and the US territories and funds are renewed every year.
Down payment is one of the top hurdles to conquer in the home buying process.
A Down Payment Assistance (DPA) and/or a grant (they can be combined!) are huge leaps towards attaining homeownership for low-and-mid-income (LMI) homebuyers.
As I discuss elsewhere in this site/blog, there are tons of mortgage companies, banks and credit unions out there who are eager to make FHA loans with as low as 3.5% down!
Even with the moon-high home prices nowadays, there are still homes to be had for $300,000 in many places of this Great Country of ours! It is more so, here in Georgia, my home state!
Well, if you receive a $12,000 DPA from Georgia Dream program you can cover the 3.5% down payment of $10,500 and you still $1,500 left to apply towards the closing costs …which all DPAs allow the homebuyer to do!
I work out of Atlanta – where home prices are now in a historical high. Even so, I see nice homes ways below $300,000 in a daily basis.
And in many other areas of Georgia, its almost as often that I see good houses between $200K to $250,000… And it is not all that rare for me to see ‘doable’ house below $200,000
What I am trying to say is that your determination + a DPA = Successful Path to ownership!
Down payment is proven time and again to be the most challenging barrier to home ownership. A DPA cuts that burden for those otherwise qualified to buy a home but who are still short on savings to meet mortgage market requirements to own that home.
DPAs are steady pools of funds geared to create homeownership in the communities they serve.
Oh! There Are Grants, Too!
There are grants too! Which, by definition, are chunks of money given to the homebuyers and grants do NOT require paying back of the principal, no interest, no liens attached to the home.
Down Payment Assistance (DPA) From Cost-To-Cost …And Beyond!
Down Payment Assistance (DPA) From Cost-To-Cost …And Beyond!
There are thousands of dollars in Federal government, State and local government, non-profits and private lenders funded money all create a robust pool of funds to assist with your down payment all across the USA.
Every county [or parish] in all 50 states, territories and Puerto Rico has its own department of housing with federal down payment assistance waiting for you.
DPA funds can also come from banks, credit unions, non-profit entities, public-private partnerships, municipalities, counties funds allocation.
Up to $100,000! “Ya, right!” You would say!
Let’s take a close look – a picture is worth 100,000 words …okay, I am being a bit facetious here:
Most Down Payment Programs (DPAs) Will Be Less …But NOT “Lesser!” At All!
The folks who run the DPAs program in you neck of the woods aim to put you foot into the homeownership!!!
They are well aware of the home prices in the cities around and they have already calculate how they need allow you to put you over the hump!!!
In a city where a startup home they will allow you something around $10K to $12,000… That is enough to cover a 3 to 3.5% Down payment and you may have some monies left to use towards the closing costs.
The $100,000 is offering reflects the well documented high price of home in NYC!
It is well worth noting that funds for DPAs and Grants come from numerous sources: Federal Government allocates ‘block grants’ to each state every year, banks, credit unions, mortgage loan companies they all contribute from time-to-time!
This Wells Fargo fund is but one in a multitude that you will find – just search what is available in your neck of the woods: State ==> County ==> City! (and sometimes a district within the city!)
ProHOMEBuzz Tip: Georgia Dream
While I am at it, Georgia, My Home State has a robust program that I explore in depth in a separate blog post!
But let’s get our feet wet right away:
Georgia Dream Homeownership Program Flyer
In English -please click here
There Is A DPA Program Just Where You Are!
My brothers and my sisters in this vast USA community of like-minded home dreamers – the help you have praying for is already a reality right here where you are!!!
I have found the above DPA – down payment assistance in NYC – in the center of the world!
Phew! I think that I already can ‘rest my case!’
However, let’s continue and learn more about these exciting instruments that has the potential to move countless of good folks into ownership all across the USA – and its territories! AND Puerto Rico!
What does Down Payment Assistance (DPA) – really stand for in mortgage loans?
Down-payment assistance - DPA - is typically, a form of a second mortgage that provide borrowers with financial assistance to pay for the required down payment and/or closing costs associated with the purchase of a home.
A DPA makes it possible for those who do not have sufficient savings to meet standard mortgage programs requirements to buy a home.
Now, how that 2nd mortgage will be handled, it will depend on what was determined in the state you are in.
See more intel below on How do each of the DPA /Grant work, below
Different Types of Down Payment Assistance (DPA) / Grants
There are many different types of down payment assistance (DPA) and grants.
It may vary in accordance to the wishes of your home estate housing authority and, sometimes, even your county’s or city’s housing agency. It pays to investigate.
We are going to explain the differences with more details below.
Grants – by definition they are ‘given’ and do not need to be repaid
Active second (Low-interest loans) – homebuyer start paying the DPA right away along with the 1st mortgage …typically they will have a lower market rate or at least a portion of it will be at a lower rate
Silent Second Mortgage (Deferred payment loans): homeowner only pays back when home is sold OR refinanced
Phase Out Second Mortgage (Forgivable loans) Start to phase out after a certain number of year (typically 3 to 5 years). Then a percentage of the DPA belongs to the homeowner every year until it is 100% is transferred to him/her.
Mortgage lender offerings – some lender will create funds and administer their offerings according to their stablished criteria
Individual Development Accounts (IDAs) & Matched savings programs created to facilitate future home to start their own saving with the sole purpose of purchasing a home. The IDA creator will match those savings, sometime in multiple dollars
How do each of the DPA /Grant work
Here’s some additional intel about each of the DPAs/Grant work.
It can be in form of:
Grants
Grants are gifts at closing that don't need to be repaid, don't incur a lien on the property, and have no associated note or deed.
I don’t know how much of it exists out there – but they do exist! I have found quite a few here in Georgia through the years!
By definition, Grants ==> Are Non-Repayable!
You will keep 100% of it – right from the very beginning! No strings attached!
Active 2nd Mortgage Low-interest loans
Active Low-interest Loan is yet another DPA program where the home owner pays the 2nd-mortgage back but a discounted interest rate.
Payments will start soon after the home purchase along with the 1st mortgage. So is the case of Kentucky, as we can see here:
Second Silent/Soft Mortgage: Deferred payment loans
Also known as a 'silent/soft' second mortgage means that the recipient does not have to make payments during your ownership!
Payments are deferred - Up until the time there is a transfer of ownership. Which can be via selling the house OR if and when the owner refinances the home.
To make sure that you understand: There is a lien attached to that 2nd mortgage and it is filed at the court house along with the 1st mortgage.
These deferred DPA programs do not require payments of interest NOR any part of the principal as long as the original homebuyer continues to own and live in the house.
In the event the house is sold OR refinanced, the only thing houseowner return is the original ‘face value’ they received at the time of the purchase. Which to say: If they received $11,000 that’s how much they will return! No interest, no penalties! Nothing else!
ProHOMEBuzz Tip: Married couple make sure that the house ‘title’ is in both your names and it is “Joint Ownership with the right of survivorship” – this way, legally, it does not change ownership. And the surviving espouse does end up with the grief AND the burden of having to come up with moneys to pay the DPA at the same time.
PS.: It is my firm believe that a espouse that is added to the title after the closing, will not qualify for the benefit I mentioned above.
Consult the program or a real estate lawyer in your state.
Forgivable, Phase-out Or Non-Repayable DPA
Forgivable Or non-payable - there is an initial period of 'vesting'- typically, 3 to 5 years in which funds still belong 100% to the DPA program.
Then the initial amount of the DPA starts to, gradually, be transferred to the houseowner every year – at a pre-established percentage.
It is done in such a way that, at the end of that pre-established number of years, the house owner owns the amount of the DPA out right.
Once again, it will depend on how the program was set up, but it is typically another 3 to 5 years after the initial ‘vesting’ period.
ProHOMEBuzz Tip: I have an received email from people saying they ‘wanted no-repayable’ DPA. It will be up to your county to determine it …or it may be even statewide how the program is structured.
It may be like the TAD I describe elsewhere on this blog post – they are created for that ‘geographical area, for a determined period of time.’ Then they are closed and there is no more!
It is a cliché – but I will say it here: “Timing is everything.”
Mortgage lender offerings
Many banks and credit unions may have their own programs to assist with down payment. They will have their own requirements
Individual Development Accounts (IDAs) & Matched savings programs
What are IDAs?
Individual Development Accounts (IDAs) are matched savings accounts that allow individuals and families to save and generate money for a specific savings goal. In this case to create a fund for a house down payment.
For every $1 you save, you receive a match of an additional dollar amount. The total amount you can save in an IDA is capped at $2,000 of your own funds.
Then the entity holding your money will match to the amount they have promised. The matching amount will vary from place to place. Many offer up to $4 to each $1 dollar you deposit… I have seen one as generous as $5 to $1.
It necessarily will be an effort of several entities and a public/private endeavor.
These are kind of complex instruments; however, I want to point them out for the reason that they will demonstrate to lenders and housing authority folks that you ‘have being doing things right’ and you are a ‘trustworthy applicant’ for a DPA/Grant.
An IDA will not interfere with SSI income, once it has a set purpose for its creation.
I would say that you should look and ask around in your state.
Down Payment Assistance DPAs Programs
Are Available in All 50 States
And The US Territories
I have been studying grants and down payment assistance programs (DPA) for many years now.
I have studied enough to be able to affirm that home buying DPAs and grants are indeed available in all 50 states!
How To Get Grants and DPAs
Here is how grants and DPA – Down Payment Assistance work.
As I have been pointing all along, it is necessary to be diligent and pay close attention what a DPA or grant offers and how each one of them works.
In other words, not all home buying grants or DPAs are created equal.
Call and ask if you would qualify.
If you do not, ask if they would know. These people are more informed than you and I will ever be.
However with tens of thousands of dollars out there which can be yours for being the right person at the in right place at the right time, your diligence could pay big dividends!
DPA Is NOT a Lottery!
Please do NOT get the impression that DPA Programs are like lottery – Far from it!!!
It is rather a permanent community resource! If, by any chance, during the year a program runs out of money – it will be renewed again in the next fiscal year.
ProHOMEBuzz Tip: Many – if not most – entities, states, counties and/or cities work on “fiscal year,” which typically run between October 1st thru September 30th.
There are many circumstances a fund can run out of money – one of them – which I would say it is the more often reason, is that there were too many applicants! …And that is a very good reason!
Begin early and do not give up on home dreams!!!
Once I worked with one buyer who had qualified for the upwards of $95,900! Adding up all the home buying grants she had secured. At the time, the combined amount of the Grants + DPAs was just shy of half of the price of the property she put an offer on.
Be proactive! Your Down Payment Assistance may be just a phone call away!
Purpose: Who are the Down Payment Assistance (DPA) For?
It is important to understand that both down payment assistance and grants are funds used for the purpose of purchasing a primary residence for low and mid income buyers.
These home buying grants and down payment assistance (DPAs) programs are designed to help homebuyers who need assistance with down payment and/or closing costs.
They also can be created for many other reasons like attract certain type of professionals, improve a designated area and simply to give people an opportunity to home ownership.
Although many of the programs specifically directed to first time homebuyers, some will be more open to all.
Never “assume” – always call and ask if you would qualify!
In case you do not qualify for that particular program – ask if they of any other program that you might!
People who run these programs are real heroes! The love to help others! And they naturally know about other programs, they will love to help you!
Generally, a first-time homebuyer is defined as a person who has not owned a home in the three years prior to applying for the grant(s).
However I have at least one program in Atlanta that requires just 18 months since you last had a home to your name!
Another program had no restrictions at all! As I have being saying all along – each program sets its own rules!
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Eligibility For Down Payment Assistance (DPA)
Unfortunately not everyone will benefit from all home buying grants because most of these grants are created for specific areas and with some professionals like law enforcement, medical professionals or teachers
…And independently to these initial requisites and other points I make below, eligibility is always tide up to low-and-medium-income (LMI) recipients.
I was playing tennis with Mr. Bill Gates the other day (*1) and I told him, that DPA & Grants are for mid-low-income folks and that he would not qualify for any those. (*2)
(*1) LOL - completely fiction a rare moment of ‘hallucination’ in this site/blog!
(*2) completely true fact, given the gentleman's well known cumulative levels of income and assets.
Any and all of these down payment assistance and grants are created and funded to assist those whose really need that extra money to help them to put their foot into home ownership. It is the last yard before the touch down!
The finance level of all applicants will be thoroughly evaluated and documented. Typically, through tax returns, pay stubs, bank/savings statements and others such documents.
Even so I encourage you to look closely and always call the appropriate people responsible for signing you in for the program you are looking for.
Another thing I need to point out is that grants and DPAs are “income sensitive.” People earning above certain threshold – even if passed by just a couple of hundreds of dollars – you may be flagged.
I once worked with a firefighter who, given the nature of the job, used to do lots of overtime throughout the period we were waiting to close, we were always concerned that the computation of her overtime earnings would jeopardize one or more of her grants.
Luckily it did not.
Too Low Income Might Have Issues Attaining A DPA
…Sorry to say, but too low income also gets flagged: Grantors want to have reasonable assurances the borrower will have the finance ability to keep the home they are buying in the long haul.
Do NOT get discouraged! Continue to build up your savings. Explore if there is a possibility of open an IDA as described above; every states also have housing counselors, connect with one of those pros – they might have ideas and suggestions how you can shore up your income …perhaps take up another part-time job on the weekends… if you can!
Keep the spirit up!
Amounts For Down Payment Assistance (DPA)
Amounts of how much each DPA will allow, may vary, however there is always an appreciable percentage of the purchase price that will be brought to the table, so to make a difference in your city.
I found a DPA of $100,000 in New York City! Home prices in the Big Apple have always amongst the top 5 highest in the US.
In one the many house-hunting TV shows I have watched through the years, I saw a studio apartment being sold for over $800,000! $100K is around 10% of the list price plus some money for the closing costs.
If a homebuyer could get $100,000 DPA in Macon, Georgia, we could find a decent house and pay for it in full…
So, Georgia Dream Program, which is available state wide, offers something around $10,000 to $12,000
Be more preoccupied to get in to the system; they will help in the proportion to make a difference in the market that you are in.
DPAs And Grants For A Specific Geographic Areas
There are some home buying grants that are distributed with no limitation of geographic area where you want to buy a property statewide.
I have pointed out within this blog post that grants work within a
State ==> County ==> City ==> District
So, I would say that it makes sense for you to apply for a DPA or Grant within the county or even within the city you want to live in.
Be flexible.
Other funds, like the ones created by a TAD – Tax Allocated District, are targeted to a specific area in a county or in a city. If the property you intend to buy is one block out of that designated area, you will NOT receive a grant from this fund.
I have seen this happen for one of my buyers here in the Atlanta area. A brand-new condominium was built just a block – or so - outside a TAD. The developers thought they could bridge the gap with the city of Atlanta… Well, tried as they might, they couldn’t. The area was not extended beyond the initial designation.
DPA Programs Designed For Special Professionals Or Special Needs
Some grants are geared toward attracting targeted professionals such as fire fighters, police officers, teachers and health professionals.
If you are in these highlighted professions, you should do some calling around.
There are programs designed to serve Disable persons
Here in my neck of the woods, we have
Georgia Dream Homeownership Program
This program offers a $10,000 standard down payment loan option, and a $12,500 option for certain recipients who will qualify.
Besides the above highlighted professionals, Georgia has several programs that offer down payment assistance for disabled people
Eligible veterans include active military servicemen/women of all branches of the Armed Forces, public protectors, educators, healthcare providers, and residents with family members living with a disability. The program also offers a special mortgage product for qualified veterans with disabilities called the “Georgia Dream-VA” loan.
So, my fellow Georgians! Help is as close as your phone or, for that matter, to your keyboard!
Repayable x NON-Repayable DPA & Grants
Home buying grants and DPAs are created with the assumption that you are going to live in the home and preferably, for a long time.
I worked with a program which was called “Neighborhood Stabilization.”
Some of these programs – like the TAD – Tax Allocation Districts, are intended to create a ‘community around a specific the area.’
You do not create a community by ‘moving in and out.’
If you are willing to do your homework and if you meet the criteria, it is possible to receive tens of thousands of dollars’ worth in assistance. It can be used towards the mortgage down payment and/or towards the closing costs.
DPAs and Grants can be combined. I once worked with a client who had qualified to the upwards of over $95,000.
And yes! It was here in Georgia, NOT in NYC!
However, it must be pointed out again, not all grants are created equal!
Grants – by definition are ‘forgivable’ or non-repayable. It can have some restrictions on how long you need to stay on the home before selling it. However, there is no payments for the principal or interest.
Down Payment Assistance (DPAs) will come in the form of a 2nd mortgage.
Depending how the program was structured, it will shape how it will handle the amount given out:
1) “Active” 2nd mortgage – you start to pay it right away along with the 1st mortgage
2) “Silent” 2nd mortgage – there is no payments at all. Nor the principal nor interest …until the home is sold, refinanced OR the owner passes away
3) Forgivable loan or ‘Phase-out:’ the 2nd mortgage will not have any payments – nor principal or interest.
a. There will be a ‘vesting period’ typically 3-5 years
b. After the ‘vesting period,’ each year the house owner will receive a percentage of the DPA that they do NOT need to pay if the home is sold. After the pre-established number of years, the homeowner receives ownership of the whole amount he/she received as DPA.
This second phase may also extend for a period of 3 to 5 years to complete or ‘phase-out.’
Next let's examine with more details, the major differences.
Repayable Down Payment Assistance (DPA)
Some of the DPA’s funds are required to be repaid back to the agency which gave you the funds in the first place.
The down payment assistance funds will take the form of a 2nd mortgage and from there on, like I have already discussed within this blog post, each program is structured with its own characteristics.
Let’s take a look here:
1) There are some programs that you will have to start to pay the 2nd mortgage back right away along with the 1st mortgage.
At last check, that was the case of Kentucky Housing Corporation:
Source: FDIC
2) “Silent Second:” Yet there are many other programs you only pay when the property is sold, refinanced OR when owner passes away… for which I wish you that it will be in a long, long, long time!
During the “Silent Second Mortgage” there is NO payment whatsoever - Nor the principal, nor interest!
However, no matter how long you own the home, when sold (or refinanced), that portion of the funds that was granted to you has to return to entity that originated it in the first place.
You return the amount your received when the house was bought! At face value!
That is to say, if the loan you $12,000 today, that is how much you will pay 30 years from now. No interest, no penalties!
Needless to say, if you can keep that money for 30 years, when you sell the property, value wise it will be much smaller than when you got it.
Non-Repayable (Phase-out) Down Payment Assistance (DPA)
Now here is a better piece of news: On the opposite end, there are many Down Payment Assistance (DPAs) which do not require to be paid back. Yep! That’s right.
Some of these DPAs/2nd mortgages have a “phase-out period.”
At first, there will be a ‘vesting period’ – which typically runs for 3 to 5 years, during which, if you sell the home, you have to return 100% of the amount the DPA program put in the home purchase
Then the ‘phase-out’ years kick-in: And with each of the year that goes by, another percentage of the money that you received is gradually transferred to the homebuyer; it may take another 5 years, with a certain percentage being transferred to the homeowner.
But eventually, the DPA 2nd mortgage will be gone, completely.
Again, each program has its own percentage schedule.
They are set up in such a way that after a certain period of years – pre-established by the creators of the programs - you will own the home outright.
It starts slowly giving a percentage to you as a permanent ownership. The longer you stay in the house, the bigger that percentage becomes effectively yours.
It may take a period of 8 to 10 years total – DPA programs aim to create a stable pool of homeowners.
Before you passed that pre-established number of years, if you sell the home, the remaining percentage of the DPA will have to be returned to the fund.
On the other hand, if you sell the property after the “phasing out” period has begun, that percentage already vested will be yours!
BUT if you stay in the property long enough… there will be a time that you will own it all outright!
So, your obligation to repay comes to an end and the lien is removed.
No monthly payments and no interest
Both ‘Silent 2nd’ AND ‘Phase-out’ programs –for as long as you occupy the home you bought with the benefit of a DPA, you do not make payment on that part of the principal and you do not pay interest either.
Sweet, hum?
One of my clients – here in Georgia - got a grant for $25,100 (good chunk of money, hum?!) It will start to phase out in 5 years and will be gone all completely in 10 years. Hooray!
That means, what I call here “free money!” – The equivalent of $2,510 extra money for you every year!
I do not know what else can I tell you to topple that!
Well, except, maybe… Always make sure which kind of grant (s) - you are getting.
And, yes! DPAs and Grants can be combined!
NOTE: I think that, by now, you may have realized why I bombarded you to look around and apply these programs! I want to make darn sure that – if you think that you might be eligible, that you do your homework and start applying right away.
If you are a teacher – or school personnel also counts, a police officer, a firefighter, or a paramedic, or a health professional it is very possible that there is “a good chunk of money with your name on it” just a phone call away.
Safety Measures In DPA Usage Measures
Grant programs will place a lien on the property whose owner received the DPA.
This will be in the form of a 2nd mortgage.
If a homeowner sells his/her property or refinance to cash out equity while there is still a lien on the property, he/she will need to return the part that was bought with the assistance.
There is a lot of money and trust the various levels of government put forth to make the home buying grants and DPAs work. So, to preserve the integrity of the program some safety measures must be put in place.
Thus the need for a 2nd Mortgage Lien
Mortgage is a lien …be it a 1st mortgage or 2nd mortgage they are both liens!
A lien on the house will be recorded in the court house and the owner will not be able to sell the house and convey a clear title until the lien OR liens are paid and satisfied.
A lien will prevent a homebuyer who is a DPA recipient from taking advantage of the DPA by selling the property in a short time and then pocketing the equity on the house.
This way, the equity is protected. If you really mean to buy and live in the home, upon meeting other requirements then you will receive the grant or DPA with no problems.
I know that you are an honest and honorable person who needs a decent place to live and you do intend to live there and call it home.
However anybody out there who will have any inkling of pulling a fast one on the public money and trust, he/she will not go very far: The 2nd mortgage lien will prevent him from doing so.
It may be “free money” but it is not “a fools money!”
Use it for the benefit you to afford a nice place for you to call home and the money is yours!
If somebody thinks of taking advantage of what was designed for the betterment of the common good – then the money has to be returned via selling the home or repaying it, so it can go to the general fund and benefit another person who really needs it!
NOTE: If you get more than one grant, you most certainly will have one lien for each of those in accordance of how the program was created. So, again, make sure you understand if they have to be paid back or not.
TAD – Tax Allocation District
I would like to wrap up with a very specific program you should keep you eyes on.
When using a TAD – Tax Allocation District, a city designates a specific geographic area that has the potential for redevelopment, but – at the time - suffers from “economically or socially distressed” conditions.
Home buying grants or DPAs which are created in connection with a TAD, just can be used to buy properties in that geographical area for which the TAD was created in the first place.
If you do not like that area or you do not find a suitable property within the perimeter of the TAD, you will not be able to use those funds… even if you want to buy a home that is off just by a block
Is there anything you still need
to know about Down Payment Assistance (DPA)?
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