Sometimes saving enough money for a down payment can be difficult.  There are programs out there that can help qualified home buyers receive help with their needed down payment funds. FHA is a well known mortgage program that typically requires a 3.5% down payment. This means that a home buyer who is purchasing a home for $100,000 would need $3,500 for their down payment.

Down Payment Assistance (DPA) lowers the required funds due at closing for an FHA Mortgage by covering part of the down payment for you.  Instead of needing the typical 3.5% down payment, the DPA would cover 2% and leave just 1.5% to be covered by the home buyer. Now, using the same $100,000 scenario, this home buyer only needs $1500 for their down payment at closing.  

How does Down Payment Assistance work?

Down Payment Assistance (DPA)  is a grant that is issued to eligible and qualified home buyers to help pay for closing costs and down payment.  This DPA is forgivable after just six on time mortgage payments. Forgivable means this money does not need to be paid back.  The only restriction is that if the loan is refinanced within the first three years, then the amount of the down payment assistance would be included in the mortgage payoff.

How do I qualify for Down Payment Assistance?

In addition to qualifying for the FHA Mortgage itself, you and anyone else on the mortgage, would just need to meet one of the three requirements outlined below.   You would not need to qualify for all of these three requirements. Qualify for one and you are good to go. All mortgage applicants who wish to apply for Down Payment Assistance must complete an online Home Buyer Education Course.  A list of courses to choose from will be provided. These courses usually take about 4 hours and the costs is usually about $100, which is paid to the course provider by the home buyer. A credit of up to $100 to reimburse any course costs can be provided at closing.  The time and initial fee spent are well worth it to earn 2% of the sale price in assistance.

Is there a minimum credit score requirement for this program?

The minimum credit score is 580 and you must also obtain an Approval for the standard FHA first mortgage.

Borrowers must meet just one of the below requirements

1) At least one applicant must be a first time home buyer or have not owned a home in the last three years

2) Any borrower on the loan application who meets the below job title (current, retired, or volunteer)

– police officer, firefighter, public safety officer,

paramedic, or emergency medical technician (EMT)

– Educator; teacher

– Medical personnel: nurse, doctor, phlebotomist, or health

ambassador, or hospital, American Red Cross worker, or similar

– Civil servant in a federal, state, or local municipality

– Military personnel

3) Total borrower income is equal to or less than 140% of median area income

The government keeps area median income (AMI) stats for each area of the country.  If the income of all mortgage applicants falls below 140% of this AMI figure, then you will meet this income requirement.  For example, if the AMI for your area is $80,000 then the total income verified for a mortgage application must not exceed $112,000.  ($80,000 x 140%)

To check the AMI for your area, check the Fannie Mae HomeReady link below and enter your address…

https://homeready-eligibility.fanniemae.com/homeready/

FHA Mortgages generally require a 3.5% down payment. Those who qualify for this Down Payment Assistance Program would be eligible for 2% assistance.

For example…

Sales Price: $100,000

FHA Required Down Payment: $3500

FHA Base Loan Amount: $96,500

Down Payment Assistance: ($2000)

Down Payment Required at Closing: $1500

A 30 year fixed mortgage at 4.5% with an APR of 4.882% and a loan amount of $96,500 would result in 360 monthly Principal and Interest Payments of $488.95. Property taxes, homeowners insurance, mortgage insurance would be added on top of the this Principal and Interest payment. FHA allows up to 6% of the sales price to be paid by the seller in the form of Seller Assist to cover closings costs that are in addition to any required down payment.