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There
are special programs with no money down,
grants for down payment
assistance or below market interest
rates.
Each of these programs may have a different combination of
guidelines for qualification.
Some programs (but not all) may require you to be a
first-time buyer, have income and sales price limits, or location
guidelines as specific as the census tract number. So how does a home buyer
know what programs they qualify for when something as simple as
choosing one property address over another can completely change the
programs you qualify for?
That is the power of
DownPaymentFinder.com.
We
streamline this process for you.
Charitable
Organizations(501c3)
Charitable
organizations (501c3) that utilize a HUD/FHA rule that allows for
down payment assistance to be given to the homebuyer. This money comes from an
existing pool of funds and can be used for a down payment and/or
closing costs per FHA guidelines. Typically, the seller gets full
asking price for their home and agrees to pay a seller’s service fee
to a participating charitable organization. The fee the seller pays
equals the grant amount which is typically 3% of the sales price
plus a fixed fee that is kept by the non-profit. This method allows
the seller to offer a home buyer a free down payment grant,
increasing the chances of a quicker sale without the seller needing
to make additional concessions.
Typically these grants
are the easiest to qualify for.
Community Reinvestment
Act
The Community
Reinvestment Act (CRA) is intended to encourage depository
institutions to help meet the credit needs of the communities in
which they operate, including low and moderate income
neighborhoods. It was
enacted by congress in 1977.
One aspect of CRA is for depository institutions to write
home mortgages and promote home ownership, particularly in low and
moderate income neighborhoods.
Because of CRA lending requirements, lending institutions may
offer “special financing” or CRA loans based on specific
criteria. Some lending
criteria are controlled by the Community Reinvestment Act while
other guidelines are controlled by and therefore unique to each
lending institution.
Because there is not one set of
guidelines from one bank to another it can be very difficult to know
which programs you may qualify for and which ones you
don’t.
Government
Subsidy
Government subsidies
can come in the form of federal, state or local programs.
Other
Most programs are
available on a first come first serve basis. Some programs have limited
funding or availability and other programs are available all the
time with variations in rate or terms. Often the terms and
availability of many special financing programs can not be
guaranteed until you have actually written a contract on a specific
property. Because some,
but not all, programs are dependent on the properrty address or
sales price these details must be known before reserving the special
financing for you.
Some down payment
assistance programs may have a specific amount of time you have to
occupy the home or you may be required to pay back a portion of the
grant from the proceeds of the sale of your home. Sometimes this is called a
“silent second”. For
example, say you receive a grant for $3,000 with a requirement to
live in the home for 5 years.
Often the grant is pro-rated over the amount of time you are
required to live in the home.
If you sell the home after 4 years you would have to pay back
20% of the $3,000, or $600.
In this case you still received $2,400 of grant money that
you did not have to pay back and the other $600 you effectively
borrowed for 4 years and it did not cost you a thing. That is better than having
to come up with $3,000 out of your pocket today. Not all
programs are structured this way.
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