What is Down Payment Assistance?
Of the many steps to homeownership, the one that is often the most difficult for credit-worthy first-time homebuyers is coming up with funds for a down payment and closing costs. For example, borrowers with high student loan payments or low to middle income may not have extra cash to set aside to save for this exciting milestone.
In response to this common challenge, many states, cities, and towns have developed down payment assistance programs to provide the funds needed to make homeownership possible.
MassHousing
MassHousing provides up to $30K in DPA assistance when you get a loan through an authorized MassHousing, such as Mortgage Equity Partners.
$30K for qualified income-eligible first-time homebuyers who purchase a home anywhere in Massachusetts. This is a fixed amount of $30K in Down Payment Assistance. DPA is a second mortgage that is interest-free, deferred, and due upon sale, refinance, or payoff of the first mortgage.
$25K For qualified income-eligible first-time homebuyers who purchase a home anywhere in Massachusetts. This is a fixed amount of $25K in DPA. DPA is a second mortgage at a 2% interest rate, fully amortized 15 year-fixed rate, and is due upon sale or refinance of the property. (APR 2%).
The fixed DPA amount must be taken in FULL and may be used for the following expenses:
- Down payment assistance
- Closing costs
- Origination charges and discount points
- Appraisal and credit report fees
- Prepaids/escrows
- Legal services
- Settlement or escrow services
- Survey
- Title insurance
- Transfer taxes and tax stamps
- Prepayment of borrower paid single MI premium (refundable) or FHA’s Upfront MIP
This program is subject to changes made by MassHousing. For additional guidance on these programs, contact your loan officer or MassHousing.
Florida Housing
Florida Housing offers many down payment assistance programs for residents of Florida who want to purchase homes in their communities but may not have the required funds for down payment and closing costs. FL Housing has programs that offer down payment assistance in the form of a second loan when used in conjunction with Florida Housing’s first mortgage loan, which is available only through authorized lenders.
FL Housing programs include:
The Florida Assist (FL Assist)
- Offers up to $10,000 on FHA, VA, USDA, and Conventional Loans
- 0% non-amortizing, second mortgage
- The Florida Homeownership Loan Program (FL HLP) Second Mortgage
- Offers $10,000
- 3% fully amortizing second mortgage
- 15-year term
3%, 4% and 5% HFA and HFA Advantage Plus Second Mortgage
- 3%, 4%, 5% of the total loan amount
- Forgivable Second Mortgage
- Special terms for repayment apply to these loans
Connecticut Housing
Connecticut Housing, also known as CHFA, offers several programs, including Time to Own. Time to Own is CHFA’s forgivable down payment assistance program for first-time homebuyers who want to purchase a home in Connecticut.
Some of the requirements for borrower eligibility include:
- First-time homebuyer who has never owned a home
- A borrower who has not owned a home in the past three years.
- A borrower whose non-signing spouse has owned a home in the past three years. (Borrower is neither on the title nor obligated under the note and has not been in the past three years.)
- A borrower who has owned a home within the past three years and is purchasing in a targeted area.
- A targeted area refers to certain CT areas designated as targeted areas based on IRS guidelines.
Targeted areas are areas of the state that would benefit from increased homeownership. If a borrower is eligible and purchases in a targeted area, the interest rate on the first mortgage loan is reduced by 0.25%, and the first-time homebuyer requirement is waived.
The most popular Down Payment Assistance programs available through CHFA-approved lenders include:
Government Insured Mortgage Program
FHA, VA, and USDA below-market interest rate mortgages with CHFA down payment assistance loan programs to eligible applicants.
Down Payment Assistance (DAP)
Borrowers can finance the down payment and closing costs with a DAP loan. A DAP is a second mortgage providing up to $15,000 in assistance. The interest rate will equal the first mortgage rate in effect or 5.00% (5.10%-5.50% APR), whichever is less.
Time to Own-Forgivable Down Payment Assistance Program
A Time-to-Own loan can be combined with down payment assistance for down payment and closing costs. Borrowers can receive up to $50,000 in DPA assistance for homes in a high or very-high-opportunity area and up to $25,000 for homes in areas other than high or very-high-opportunity areas. This loan has a 0% interest rate with no monthly payment required.
Other program guidelines must be met and can be reviewed with you by working with one of our approved loan officers.
Rhode Island Housing
Rhode Island Housing has a down payment assistance program offering grants to eligible first-time homebuyers. The grant can be applied to down payment and closing costs.
Eligibility requirements include:
- First-time homebuyer who has not owned a home in the past three years
- Meet minimum credit score requirements
- Meet RI Housing income limits
- Complete a homebuyer course
- Get a first mortgage through an authorized lender
- Occupy the home as a primary residence
South Carolina Housing
South Carolina Housing (SCHousing) assists low to moderate-income families and individuals by offering fixed-rate first mortgages through approved SC Housing lenders and a down payment assistance program to help pay for the down payment and closing costs.
Borrowers must meet the qualifications for the first mortgage under SC Housing’s guidelines to be eligible for down payment assistance. Funding is based on availability, so be sure to have your loan officer check before applying. Borrowers must attend a homebuyer’s education course, and the properties must meet eligibility guidelines and be located in South Carolina.
SC Housing offers a forgivable down payment assistance option to all qualified borrowers. The DPA may only be used toward a borrower’s down payment and closing costs. Borrowers must meet sales and income limits and SC Housing’s first mortgage requirements. SC Housings DPA is a second mortgage with a fifteen-year term. The interest rate is 0%, and there are no monthly payments. The borrower must occupy the home for 15 years for the assistance to be fully forgiven.
New Hampshire Housing
New Hampshire Housing has mortgage programs that assist homebuyers with down payment and closing costs. Their most popular program provides up to $10,000 in funds. The assistance comes in the form of a second mortgage that is forgiven in five years as long as the borrower still resides in the home and has not refinanced or filed for bankruptcy.
Depending on the chosen mortgage program, income limits will apply, and borrowers must complete homebuyer education. NH Housing requires that homebuyers work only with approved lenders such as Mortgage Equity Partners. Contact one of our loan officers to learn more about these options through NH Housing.
The Chenoa Fund Down Payment Assistance program is available in many states nationwide. This program provides repayable and forgivable second loans with a rate that matches the interest rate of the FHA first mortgage loan. The Chenoa Fund Down Payment Assistance program is paired with the FHA first mortgage, offering a 3.5% or 5% down payment assistance to borrowers with an annual income of 135% or less of the Area Mean Income or (AMI) for the county in which they are purchasing a home.
All FHA guidelines must be met and this product can be repayable or forgivable. Repayable down payment second loans have a 10-year term with an interest rate matching the interest rate on the first mortgage.
The forgivable option has a 30-year term, no interest rate, and no monthly payments. Forgiveness is based on the DPA amount.
Down payment assistance programs can give homebuyers the extra push they need to overcome financial obstacles to homeownership. As with most financial assistance, there are hoops to jump through, but in most cases, it is worth it if you genuinely want to achieve the dream of homeownership. All of the programs mentioned in this article have additional guidelines and requirements that must be reviewed with you by a qualified mortgage loan officer in your area before applying. Working with an approved lender and experienced loan officer will make the process much easier and help you on your way!
