Down Payment Assistance (DPA):

While many loan programs allow for a low down-payment, saving for the down payment remains the number one challenge for first time home buyers.

A very popular way to cover the expense is by using a Down Payment Assistance program.  There are numerous DPA programs available including:

• Grants
• Gifts
• Second Mortgage – non-repayable
• Second Mortgage – repayable

What is a down payment assistance (DPA) program?

A down payment assistance program is a type of loan or grant designed to cover the down payment needed to purchase a home.  These programs are geared towards first time home buyers and work in conjunction with the first mortgage the buyer is qualified for.  DPA programs are available directly through a lender, as well as federal, state, county, and city government programs

Depending on the program, first time home buyers can purchase a single-family home, condo, townhome, or a multi-family property up to four units, provided they live in one of those units.

What are the eligibility requirements?

In general, a down payment assistance program can be used with any type of mortgage the first time home buyer is qualified for.  Some programs can only be used with one type of mortgage, such a government backed loans.  The specific requirements vary from DPA to DPA but typically require:

• 620+ credit score
• Good work history
• Verifiable income

Types of down payment assistance programs

Grants – A grant program is a type of down payment assistance that provides a one-time lump sum payment, often in the form of a no-interest, no payment second mortgage that does not have to be repaid.  The funds can be used to cover all or part of a down payment or closing costs.

Forgivable Loans – A forgivable loan is technically a second mortgage but looks more like a grant because you don’t have to repay if you meet certain requirements.  These include making your mortgage payment on time every month and staying in the home for a specific period, usually 3-5 years.  During this time, portions of the loan are forgiven in increments until its completely forgiven at the end of the period.

Low Interest Rate Loans – This type of down payment assistance also functions as a second mortgage, but with a more affordable interest rate and monthly payment.  The payment includes the down payment assistance amount received, plus interest, and is typically structured as a 10-year loan.

Deferred Payment Loans – A deferred payment loan is similar to a low interest rate loan but the borrower does not make monthly payments.  The loan is repayable only when the property is sold, or the first mortgage is refinanced.

Lender Funded Down Payment Assistance – A lender funded DPA is a program offered by a specific lender.  The assistance can be in the form of a grant, forgivable loan, low interest rate loan, or a deferred payment loan.  These programs have become very popular in recent years resulting in most lenders having some type of program to offer.

Deciding on how much money to use as a down payment can be confusing. Buckhead Home Loans is here to help. The route for each buyer or investor depends on their situation and personal preferences.

Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.