Site icon Total Mortgage Blog

The Pros and Cons of Down Payment Assistance

Not everyone has the funds saved to make a big enough down payment on a home. If you’re a first-time home buyer, the good news is that you may qualify for down payment assistance through state or local programs.

There are many pros and cons of down payment assistance, but these programs can help put homebuying within reach for those who qualify. 

Here’s what you need to know about down payment assistance and how it can help make homeownership possible. 

What Is Down Payment Assistance and How Does it Work?

Buying a home typically requires homebuyers to make a down payment, which is part of a home’s purchase price you pay upfront. Down payment assistance, which is generally reserved for first-time homebuyers, is any program or funding that helps buyers reduce the amount they need to save to make a down payment.

DPA programs are offered nationwide by state, county, and city governments, non-profit organizations, or directly through the lender. Depending on the down payment assistant (DPA) program, you could receive a grant or low-interest loan to use towards your down payment. Some DPA programs allow buyers to use funds towards closing costs as well.

Common types of down payment assistance include:

Who Is Eligible for Down Payment Assistance?

Down payment assistance is generally only available to first-time home buyers; however, being a first-time home buyer doesn’t necessarily mean it’s your first home purchase. You can qualify as a first-time home buyer if you haven’t owned a principal residence for the three-year period ending on the date of purchase of the new home.

Qualification may also depend on your household’s income and your credit history. The purchase price of the property and its location may also be considered for certain down payment assistance programs. 

Each DPA program is different, so make sure to check with the program if you’re unsure about eligibility.

If you’re ready to become a homeowner, check out Total Mortgage. You can apply for a loan online and get a free quote.

How Long Does It Take To Get Down Payment Assistance?

How long it takes to get down payment assistance depends on the program. Every DPA program has its own process, so speed will vary.

Don’t be surprised if it takes longer to close on your mortgage. Because these programs must work with your lender, down payment assistance could also affect your closing timeline.

Pros and Cons of Down Payment Assistance

It’s important to weigh the pros and cons of down payment assistance before deciding if it’s right for you. Here are some key points to keep in mind. 

Pros of Down Payment Assistance

Cons of Down Payment Assistance

Do You Have to Pay Back Down Payment Assistance?

Down payment assistance isn’t always free money. Whether or not you have to pay back down payment assistance depends on the program. Each program has different terms, so it’s important to pay attention to the details.

Low-interest loans and deferred loans typically have to be repaid, but grants and forgivable loans may not have to be paid back. However, you may be required to meet certain conditions in order for the loan to be forgivable. 

How Much Do You Get for Down Payment Assistance?

How much you get for down payment assistance depends on the program. Some may offer a flat dollar amount while others may offer a percentage of the home’s purchase price. 

For example, MassHousing covers 10% of a home’s purchase price up to $50,000 in down payment assistance if you purchase a home in select communities or up to $30,000 elsewhere in the state. Meanwhile, the Connecticut Housing Finance Authority (CHFA) provides a down payment assistance loan of up to $20,000.

Need Home Financing? Consider Total Mortgage

Down payment assistance isn’t for everyone. There are plenty of pros and cons of down payment assistance and each program comes with its own set of eligibility requirements. Make sure to consider all of your options and the long-term consequences of accepting assistance.

Looking for the right mortgage product? At Total Mortgage, we have mortgage experts across the country to help you with your home buying needs. Find a Total Mortgage office in your area today to explore your options.

Exit mobile version