Mortgage Mythbusters: Down Payment Assistance As a Home Buying Option


One of the great challenges to homeownership is coming up with the significant financial investment required for down payment and closing costs. What do you do when you have good income and good credit, but have been unable to save the money for your down payment. Currently the median home price in California is $372,000. With a down payment of 3.5% and closing costs the investment could be upwards of $22,000.

If you could save $500 a month, which is significantly higher than the national average it would take you nearly 4 years to save the necessary funds. In that period of time you are most certainly going to see an increase in interest rates and home values, which means a decrease in buying power. A 1 percent increase in interest rates means a 10% loss of buying power. That means todays $450,000 house may be a $400,000 town home a couple of years from now.

If this is your only challenge, there is practical solution if you can sort through bad press circulating the net. Your solution may be a down payment assistance program. Down payment assistance is not for everyone, but you won’t know until you have accurate information. There are 5 myths repeatedly associated with these types of programs. Continue reading if you want the facts.

Myth #1: It’s difficult to qualify for a down payment assistance programs.

Many potential homebuyers believe that it is very difficult to qualify for homebuyer assistance programs. In actuality, it is easier to qualify for these types of programs than other types of assistance. Most programs outline a few requirements to qualify. Some of the more common guidelines include minimum contributions, income requirements, and sales price limits. If you meet the standard guidelines then you are approved. Any designated approved lender should be able to determine if you qualify within a few days with the right documents.

Myth #2: Down Payment Assistance Programs constantly run out of funding.

There are many public and private sources of funding for down payment assistance programs. There are hundreds of millions of dollars available annually for down payment assistance, tax credits, and closing costs assistance. Each program has a different funding schedule. Some programs have a set amount available to start the year and are not replenished until the following year. Other programs have unlimited funds available throughout the year. Do your research on the type of program you are interested in and how it is funded.

Myth #3: Down payment assistance programs make home financing more difficult.

Financing for a down payment assistance program is different from traditional financing but it doesn’t need to be more difficult. Typically the process of getting financed through a down payment assistance program is not much different than traditional financing programs. The most important factor is beginning the process early.

Managers of these programs provide special training and guidance for approved lenders. Approved lenders are qualified to provide these programs to the public and have the proficiency to include special financing into the loan process without creating complications or lengthening the home buying process.

Myth #4: Down payment assistance programs take longer to close.

Buyers and sellers are both eager to complete the transaction once the process begins. Down payment assistance programs do have additional steps, but it doesn’t need to be an extended process. Many of the requirements specific to these types of programs should be handled upfront. Being prepared and working with an experienced lender will allow you to meet timeline expectations and deal with possible challenges ahead of time.

Myth #5: Sellers won’t accept offers that include down payment assistance.

Sellers may initially take pause when receiving these types of offers. They may fear extended closing times or added complications. Your lender should be experienced at presenting these programs in a favorable light and soothing any concerns. With more clarification sellers tend to be more open to the idea of accepting these types of offers.

An applicant using down payment assistance may be able to offer a higher purchase price and may not need seller credits due to the additional cushion to work with. Ultimately it’s about setting expectations and communicating the benefits.

If you are interested in a down payment assistance program, it’s worth finding out if a program can help you achieve homeownership. One thing is for certain, the only way to find out if this is your solution is to lay all myths to rest from unconfirmed sources, and get the facts. from a trained professional.

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