Mortgage Down Payment AssistanceDown payment assistance programs (DPA) are designed to help you with your down payment when buying a home. If you are having trouble raising the cash needed to buy your home, then help is available – but funds are limited, and many state and local governments will rapidly run out of such assistance.

DPA did not work as it should when it was initially introduced, and many homeowners who had purchased with low down payments defaulted on their loans. Since a prerequisite for receiving mortgage down payment assistance is that the mortgage must be FHA insured, the FHA (Federal Housing Administration) had to pay up for many of these mortgages.

This made the Administration, administered by HUD (Department of Housing and Urban Development,) think again regarding the continuation of such assistance programs. It believed part of the problem was a lack of commitment by home buyers who had no down payment tied up in their home. However, it is apparent that such assistance is still to be found in 2013, although a lot depends on your state and how much funding has been set aside to qualifying applicants for the program.

Qualifying for DPA

Because of this question as to the future of HUD down payment assistance, it is important to get your application in early because the cash that is available will likely go quickly. Here are some of the qualifications that are being applied:

  • You will normally have to be a first-time buyer
  • Your income should be in the low to moderate bracket (no more than 80% of the median income for your area.)
  • You must be an owner-occupier, i.e. you will live in the property you are purchasing.
  • You must have an FHA mortgage:  one where the lender is insured against non-payment by the FHA (you pay the FHA for this insurance.)
  • There will be a stated minimum FICO score.

There may be a stated maximum debt to income ratio.

This is not exhaustive, and the qualifications applied will vary between local authorities, municipalities, counties and states. There may be other variable stipulations. For example, you may have to attend a home buying workshop. A good mortgage advisor will be able to help you out with the requirements of the area you live in.

How Mortgage Down Payment Assistance is Provided

In some cases the assistance will come in the form of a grant of up to $5,000. It might come in form of a loan that is repayable when you sell your home, or even wiped out if you live in the house for a minimum of three years. The meaning of the term ‘first time buyer’ can also vary. Keep in mind that this assistance is only to be used for the deposit or down payment on a home.

If you are in the position of being able to afford mortgage repayments for a new home, but cannot find the funds for a down payment, then a mortgage down payment assistance program might suit you perfectly. For a number of reasons, some explained above, such programs are dropping in popularity with the authorities, but you can still get them if you act quickly.