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How Down Payment Assistance Works When Buying a Home

Certain professionals may find it difficult to save up for a home — be it teachers, police officers, or other public employees. But the good news is that it’s not impossible to do so.

Through home down payment assistance programs, home buyers can get the financial support they need to find their ideal home. There a number of options available, from fixed or adjustable VA loans to first-time home buyer loans. Different kinds of buyers will benefit from programs that are specifically tailored for their needs.

So what does the whole process look like?

How it works

State housing finance agencies are typical sources of funding for home down payment assistance programs. There are also city and county level initiatives that help contribute to the latter. The overall aim is to provide affordable housing to low and moderate income individuals.

When you apply for assistance, you need to go through these government bodies. Before you do so, you need to check if you meet the requirements. These qualification requirements differ depending on the type of program you apply for, but in general, you have to comply with the following:

  1. Confirm that you’re a first-time home buyer.
  2. Ensure that your income is within required limits. If you’re a high-income earner, you won’t qualify.
  3. Select a home within an approved location.
  4. Avoid going above the maximum purchase price.
  5. Allocate a portion of your income.
  6. Undergo a home-buyer education course — developed by the US Department of Housing and Urban Development.

Assistance comes in various forms

There are several assistance options available, each will have its advantages and disadvantages.

If you’re looking for financial support that mostly has no strings attached, grants are a good option. One example of this is the Teacher Next Door program, which grants up to $6,000 to eligible educators, administrators, and school support staff like bus drivers and maintenance personnel. No repayment is required. You can also get discounted title insurance fees and a real estate agent rebate.

There are also zero-interest and forgivable loans, which will no longer count against you after a certain period. You have to make sure that you’re still residing in the bought home after that period lapses.

Additionally, low-interest loans may work for you if you just need more time to pay off debt. These loans spread out the closing and down payment costs over a long period of time — some run for 10 to 15 years.

Start making inquiries

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Start exploring options and making inquiries. Find assistance programs and lenders in your state. Check what your state housing finance agency can offer. In addition, reach out to city or county officials to learn about any local grant programs you can pursue.

These agencies and organizations will typically have a website or some form of online presence. It may be worthwhile to first see what information is available online, before making any calls.

Once you find a program that suits your needs, get a mortgage with an approved lender. You can also ask recommendations from local government agency staff and see if they can refer you to a loan officer who experienced in these matters.

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