Everyone knows that buying a home can be costly. Those that are buying a home need to deal with several kinds of fees throughout the process. Typically, a common expense would be the down payment. This means a specific amount of money that a home buyer needs to pay at the start of the purchase process. However, when referring to someone buying a home, a down payment is a specific amount of money a buyer pays for when they are at the beginning of the home-buying process.

The down payment isn’t worthless though! It’s equal to a portion of the total purchasing price of the home. Generally, buyers need to pay down payments at the beginning of buying a house. Any cost remaining goes towards the mortgage. How much money the buyer needs to offer is based on several factors. Fortunately, there are assistance options out there that can support people who need help with the down payment.

What to Know About Down Payment Assistance

Let’s get some context on just how much down payments can be. If the purchase price of a house is $300,000 and you need to provide a minimum down payment of 10% then you need a whopping $30,000! This can be a lot for homebuyers to handle which is why it is important to see what opportunities are out there.

What are the Different Kinds of Down Payment Support Opportunities?

There are different kinds of down payment support options available that can help you out. These options would be:

• Loans With Deferred-Payments
• Grants
• Loans With Forgivable Mortgages
• Loans With Low-Interest Rates
• Matched Savings Programs
• Loans With Deferred-Payment

A common down payment support option is a loan with deferred payments. This means that the borrower or those that will receive the loan do not need to pay off the second loan until:

• They move away or sell the home
• They refinance the first mortgage or repay the first loan

Typically, borrowers pay off these loans with the amount of money they receive from the sale of the home.

Grants

This down payment support opportunity is pretty popular. That is because grants do not require the recipients to pay off the amount later on. Technically, it is thought of as a gift to recipients. Yes, you read it right! There are grants out there that offer free funds to those that buy homes. However, you should remember that every down payment support option is different. There are some organizations that offer grants that require a second lien on the property. You will want to make sure you are informed about the kind of support you are getting.

Loans With Forgivable Mortgages

These kinds of loans come in the form of a second mortgage. However, they do not need the homebuyer to pay it off as long as they follow a specific requirement. This requirement is that the homebuyer stays in the home for a certain amount of time. There are other benefits that come with not needing to pay it back as long as the homebuyer meets the terms.

Another advantage to this kind of mortgage is that it offers a 0% interest rate. Typically, lenders will forgive this kind of mortgage after five years have passed. However, not every lender operates the same, so the specific period could be more extended than that. Typically, recipients use the money from the loan to pay off the total amount of the down payment.

Loans With Low-Interest Rates

When you are finishing up your first mortgage, you have the chance to get a second mortgage from your lender, an agency, and so on. You can use the money from the second mortgage to deal with your down payment. This type of loan requires monthly repayments, but you can get a low-interest rate on these loans. In some cases you may even be able to get these loans with no interest at all!

Matched Savings Programs

Another name for these programs is individual development accounts, which offer down payment support. This is because buyers can add funds to an account with a:

• Federal agency
• Bank
• Community organization

The money that the homebuyer adds to the account is matched by the financial institution. After that, the total amount of money from both the agency and the buyer covers the down payment.

Frequently Asked Questions

Down payments and down payment support can be a bit stressful, which means you might have some questions.

When Will You Receive Down Payment Assistance?

The amount of time it will take to receive down payment assistance can differ based on several factors. That would include the kind of support you’re receiving, the type of loan you have, the agency, and so on. When you are looking through your options, you should find out about the down payment support source. Before you decide on this program, you should discuss the specific timeframe with the organization.

How to Be Eligible for Down Payment Support?

As mentioned before, the exact conditions will depend on the lender. However, you can expect certain requirements like:

• Attending a financial home-buying class
• Having a qualifying credit score
• Staying in a property in a certain area and for a certain timeframe
• Taking into account your debt-to-income ratio (DTI)

How to Look For Down Payment Support Options?

Interested in looking for down payment support options? You can look through several resources, like:

• Local government and state agencies
• The United States Department of Housing and Urban Development (HUD)
• Housing counselors that the HUD approves of

Bottom Line

When you are purchasing a home, there are several fees that you will need to handle. One common expense that people generally deal with when buying a home is a down payment. When you are buying a home, a down payment means a specific amount of money that amounts to a percentage of the home’s total buying price. It could be a lot for some people, which is why a lot of people consider down payment support options. Some opportunities that can help you out are:

• Loans With Deferred-Payments
• Grants
• Loans With Forgivable Mortgages
• Loans With Low-Interest Rates
• Matched Savings Programs

There are more options out there that can support you with your down payment than you may think!