One of the primary hurdles impeding potential homebuyers from purchasing a home is the required down payment. Unfortunately, there are a lot of myths surrounding down payments including who is eligible for down payment assistance, what loans are compatible with down payment assistance, the length of time it takes to close with down payment assistance programs and more. This article will address some of the most common down payment assistance questions.

 

Question: Is down payment assistance only available to first-time homebuyers?

Although many homeownership programs target first-time homebuyers a number of programs are available for repeat buyers as well. Those programs that are specific to first-time homebuyers use the Department of Housing and Urban Development’s definition of a first-time buyer as anyone that has not owned a home in three years.

However, most agencies will require primary residence of the home in order to qualify, so assistance for purchasing a rental property may not be available. In addition, homes purchased in certain areas could mean the first-time home buyer requirement may be waived. Many times veterans are eligible for a first-time homebuyer waiver as well.

Question: Are down payment assistance programs still funded?

There are hundreds of dollars of public and privately funded down payment assistance, tax credits, affordable fixed-rate mortgages and rehab loans available throughout the country. In Mid-Michigan over 15 down payment assistance programs are available to home buyers.

Question: How do I know which homes qualify for assistance?

The Greater Lansing Association of REALTORS® has fully integrated down payment assistance programs in with listing data to highlight properties that are eligible for down payment assistance programs.  Browsing for homes on www.lansing-realestate.com makes it easy for homebuyers to see what homes qualify and which programs the buyers can qualify for. From there, homebuyers can get more information about assistance programs that are a good match for them and connect with REALTORS® or local lenders for more information about specific programs.

Questions: Wil using a down payment assistance program makes home financing more difficult?

Getting qualified for and using a homebuyer program requires a fair amount of paperwork and is similar to securing a first mortgage. The key is to begin the process early in your home buying journey to ensure a smooth, successful transaction down the road. Working with a trained lender is crucial to make financing with down payment assistance easy. Check with your REALTOR® to see which lenders are knowledgeable about down payment assistance programs in Mid-Michigan.

Question: Is down payment assistance only available for homes $100,000 and less?

In Mid-Michigan, 70% of all homes for sale are eligible for one or more down payment assistance programs.

Consumers think because the word “assistance” is involved, down payment programs are only available for inexpensive homes and or lower income buyers, but in Mid-Michigan programs are available for homes up to $271,000 and income levels up to $93,000 per year.

Having a large family can help. Income limits are usually based on household size. Meaning limits for a family of six are significantly higher than for a single person.

Question: What type of loan allows for down payment assistance?

FHA may be the most common or compatible first mortgage option, but are certainly not the only option. FHA loans have more flexible down payment requirements than some other types of loans making is a good fit, but are not the only option.

Other loans also compatible with down payment assistance are MSHDA, VA, USDA and conventional loans.

Purchase price and assistance amounts are really what determine what loan type is the best fit for a certain assistance program.

Question: Will it take longer to close if I have down payment assistance?

Some of these programs may take a little longer than a typical transaction without down payment assistance. However, buyers can get started on the homebuyer education course required by down payment assistance prior to putting an offer on a house. As long as the requirements are met early, it should not extend the closing process. REALTORS® can help home buyers find lenders with expertise in down payment assistance programs who can keep buyers informed every step of the way.

Question:  Is it advantageous for buyers to put down more of their own money for a bigger down payment?

The main concept behind down payment assistance is to allow buyers the chance to keep some of their savings for long term homeownership success.

The application process teaches potential buyers about the responsibilities and expenses of homeownership, including appliance repair, yard upkeep, heating and cooling checkups, home budgeting, and more.

With a successful down payment assistance program, homebuyers will have money budgeted for home maintenance and a savings cushion for home emergencies.

REALTOR® members of the Greater Lansing Association of REALTORS are able to quickly and easily connect eligible buyers with properties that are eligible for down payment assistance. Find a local REALTOR® or lender at www.lansing-realestate.com to learn more about down payment assistance programs.