Many folks do not realize that it is even possible to acquire a home loan with little or even no money for a down payment. We are here to tell you, yes you can! You just need to do your homework in finding the right program to assist you or what programs are available in your area. And these various programs are not just for low-income buyers or the first time home buyer. According to a national database “Down Payment Resource”, there is approximately 2,500 available programs and of those 69% give assistance regarding down payments.
The national government programs consist of: FHA, USDA Rural Development Loans (commonly referred to as “RD loan“), VA home loans and the more universally known government backed initiatives called Freddie Mac and Fannie Mae (for more specific information on each program click on name of program).
Then there are the state and local residential home buyer programs each with there own requirements to meet. A number of the main restrictions pertain to income limits, the home’s purchase price, your credit score, location and condition of the home to be purchased, if you are a first time buyer, whether you are a veteran or active military, etc. Two other possibilities on the local and state level is to subsidize first mortgages so they are cheaper for the buyer or get a Mortgage Credit Certificates (MCCs) which enables the taxpayer who purchased the home to annually claim a tax credit “for some portion of the mortgage interest paid during a given tax year” for the life of the loan.
Another avenue to turn to are the down payment assistance (DPA) programs. One option is the “forgivable loans and grants” which offers a gift to the buyer of a specific sum for a portion of the down payment and the closing costs or all of it. Since it is a “gift”, the buyer does not repay the gifted amount. One source for this type of program is the National Home Buyers Fund, Inc.
The next option for a buyer is to obtain a Second Mortgage. There are three types of Second mortgages: Soft (sometimes forgivable) and then silent (deferred repayment) or a hard second (repayment starts at closing).
So how do you know which assistance program would be the best for you? Did you know that there are “housing couselors” who do just that? One national source is NeighborWorks where you can search your state and zip code for housing information. Or, you can explore the website Down Payment Resource previously mentioned, get a referral of a trusted mortgage lender in your area who you can talk to or sit down and have a conversation with your own real estate agent! They are a wealth of information and/or resources.
For the complete article by KELLEY WALTERS go to: “Little-Known Ways You Can Buy A House With No Down Payment” (1/2019)