This BLOG On Down Payment Assistance Mortgage Program For Home Buyers was PUBLISHED On February 28th, 2019
We have some very exciting news at Gustan Cho Associates. In the upcoming weeks will be offering down payment assistance mortgage! We receive phone calls every single day about down payment assistance mortgage program and we have listened to you. We are excited to say you can purchase a house with the little as 1.5% down payment! We are excited to announce we are able to offer down payment assistance mortgage program in most of the states we operate in. This blog will be the first of many detailing this exciting program.
Down Payment Assistance Mortgage Guidelines
Below are some of the general requirements:
- The down payment assistance mortgage program comes in a form of a forgivable grant equal to 2% of the purchase price
- Minimum credit score of 580 FICO
- Must have an automated AUS Approval (no manual underwriting)
- The income for borrowers on the application cannot be greater than 140% of the state or County
- This hold true regardless of family size
- Must be used for a primary residence
- MAX DTI (debt-to-income) equal to or less than 48.99%
- MAX LTV (loan-to-value) is 96.5%
Eligible Properties With Down Payment Assistance Mortgage Programs
Eligible property type include the following:
- 1-2 unit properties
- FHA approved Condos (check link for eligibility: https://entp.hud.gov/idapp/html/condlook.cfm)
- PUD’s (planned urban developments)
Types Of Eligible Down Payment Assistance Mortgage Programs
- FHA 203(b) – when you think of a standard FHA loan, that is a 203(b)
- FHA Repair Escrow – these are rare situations when something minor needs to be fixed in the home and the funds to do so are held in escrow
- FHA 203(k) Limited
- FHA 203(k) Standard
- THAT’S RIGHT – DOWN PAYMENT ASSISTANCE MORTGAGE ALLOWED ON A RENOVATION LOAN
Participating In DPA Mortgage Programs
How to participate in the down payment assistance mortgage program?
The borrower must complete a homeownership counseling course. These are offered by an identity of the borrower’s choice but must be approved with HUD / FHA. The cost of the course will initially be paid by the borrower, but the lender will credit up to $100 back at closing for this course. This course is mandatory and educational. It will teach you about the potential risks of homeownership and proper budgeting. For more information on what these courses offer for where to find an approved course please visit:
After completion of this course, you must send in your certificate of completion. The loan will not be able to close without this.
Who is eligible to use the program?
- As mentioned above, total borrowers’ income is equal or less than 140% of median area income
- First time home buyers
- Any borrower on the loan application who is a current, retired, volunteer, or non-paid
- First responder: defined as a police officer, Public Safety Officer, paramedic, firefighter, or emergency medical technician (EMT)
- Medical personnel: nurse, doctor, phlebotomist, health ambassador, American RedCross worker
- A civil servant in federal, state, or local municipality
- Military personnel
The down payment mortgage assistance comes in the form of a forgivable grant. The down payment assistance is capped at a maximum of 2% of the purchase price. Since FHA requires 3.5% down, we utilize 2% from the down payment mortgage assistance and only 1.5% from your own funds.
Closing Costs On DPA Home Purchases
Please keep in mind that you are still responsible for closing costs but can use seller concessions to pay up to 6% of the purchase price towards your closing cost. Seller concessions combined with the down payment assistance cannot result in your receiving cash back at closing. That is simply not allowed. This gift is forgivable after 3 years of homeownership. Meaning you cannot refinance your loan within the first three years or you will owe the down payment assistance funds back. Same is true if you sell your home. The average American is in their home for more than three years, so we do not see this being a problem. One thing to know, using down payment assistance programs does take longer than regular FHA loans to close. There are a few more steps involved to receive this grant, we recommend asking for at least 45 days to close on this program.
DPA Loan Program With No Closing Costs
Down payment assistance mortgage programs are an amazing way to get into a home. Sometimes they are not the best option for your long term. Seller concessions have been very popular in the housing market as of late. With home values on the rise, larger down payments are needed. Since funds for down payment are the largest hurdle for potential home buyers we have a few suggestions. If you have verified funds for the required down payment but would like to keep that money in your pocket, it may be a good idea to ask the seller to pay concessions. Depending on the loan program you choose concessions are different.
Please see below:
- Conventional 3%
- FHA 6%
- USDA 6%
Qualifying For Down Payment Assistance Mortgage With Direct Lender With No Overlays
It is important to weigh all your options. Sometimes utilizing seller concessions instead of a down payment assistance program will save you thousands of dollars over the long run. Please reach out to Mike Gracz on 630-659-7644 to discuss your options further. We are mortgage professionals and are available 7 days aweek to answer your questions. You may email questions directly to firstname.lastname@example.org.
There will be an official announcement once we officially roll out this program!!