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For those at the low-to-moderate-income level, the most substantial barrier to homeownership are the closing costs and a down payment associated with obtaining a mortgage loan. Because of this, most house finance agencies (HFAs) provide some closing cost and down payment assistance (DPA) to qualified homebuyers in their states with low-to-moderate-income.
DPA programs offer homebuyers low-interest loans and grants that decrease how much they must save for a down payment. Nationwide, there are over 2,000 of these programs. Country, state, or city governments operate a lot of them. DPA programs will vary by the location, but many homebuyers could qualify for thousands of dollars worth of assistance for down payments.
Most of the DPA programs through an HFA must be used along with a first-lien mortgage product the HFA offers. Several states provide stand-alone closing cost and down payment assistance that people can use in combination with any eligible non-HFA mortgage product. Certain DPA programs are focused toward certain populations, like:
Others provide assistance for homebuyers who meet the purchase price and income limitations of their programs. Programs like these are structured in various ways including:
A lot of HFAs also hand out federal funds to nonprofits or municipalities within their states for regional or local DPA or closing cost use. Frequently, these funds don’t need to be used simultaneously with HFA first-lien mortgage products.
State housing finance agencies provide this help to combine with county and city government programs to meet affordable housing needs. Frequently, the plans are provided along with mortgages targeted towards first-time homebuyers.
The types of closing costs and DPA vary by program. However, common types of assistance are:
DPA programs are usually meant for first-time homebuyers. A repeat homebuyer could be counted (and often is) as a first-time buyer if, in the past three years, they have not owned a home. Other requirements may include buying a home in a particular “qualified” area or income caps.
Each DPA program is a bit different. The exact requirements for qualifying will depend on your location and the programs available.
However, many have guidelines that are similar, including:
Each program will vary by zip code. However, you are likely to more readily qualify if you are purchasing in a “target area.” so to speak.
Here’s how you can get started:
DPA can make a substantial impact on your home buying potential. It helps you buy a home more quickly. Many buyers are stuck on the sidelines, putting money aside and watching interest rates rise and fall. DPA programs might offer grants or forgivable loans for your closing costs and down payment. Resources like these can instantly build your buying power and help you buy a home much quicker.