Is It Difficult to Get Home Down Payment Assistance?

Coming up with the amount of money needed for a down payment on a home can be a challenge for many potential homeowners. But, there are more options available for potential homebuyers than ever before if you need help with your down payment. Down payment assistance (or DPA) is money provided to homebuyers in the form of a grant or low-interest/no-interest loan to help them put down the minimum required payment on a home. 

Down payment assistance funding is potentially available from many different sources including local and state governments, as well as select federal government funding programs. Private funding sources, such as banks, nonprofit organizations, and private lending institutions, also offer down payment assistance. Each provider will have their own specific requirements to qualify for funding, and some terms may be more difficult to get than others. Understanding the various types of DPA, the associated terms, and expected conditions to qualify will help you figure out whether or not you can get down payment assistance, and help guide your search for a new home. 

What Qualifications Exist To Receive A Down Payment Loan? 

Typically, down payment assistance funds are reserved for first-time homebuyers. But don’t automatically assume you won’t be eligible for a down payment loan if you have owned a home before. You may be qualified as a “first-time” homebuyer if you haven’t owned a home in the past three years. You cannot have owned any type of property in those three years, even if it was a rental property that you didn’t inhabit. People in certain types of jobs and professions may also have special qualifying circumstances, such as first responders (police, fire, EMT/EMS), teachers, or government employees. 

Depending on who is issuing the grant or down payment loan, certain other conditions may be required to qualify for down payment funding, as this type of assistance is specifically designed to help people who cannot otherwise come up with the down payment on their own. Typical requirements include: 

• Completion of a homebuyer education course 
• Meeting certain income requirements — specifically, having income below a certain threshold 

• Selecting a home that is in a certain area or zip code 
• Intent to use the home as the primary residence of the buyer 

You should also expect to put down at least some of your own money toward the down payment to supplement what’s being provided via DPA funding. 

Is It Difficult to Get A Home Down Payment Assistance Loan? 

It can be a challenge to qualify for a home down payment assistance loan because the programs and requirements vary from provider to provider. The best thing to do is to start your research early on in the process of searching for a home. For example, if there are specific areas or zip codes that are excluded, you won’t waste time searching for a house in that area. 

There are several different types of loans available as part of down payment assistance, including low-interest, no-interest, and deferred loans, and grants. If you aren’t sure what type would be best, our mortgage officers at Financial Concepts Mortgage can help steer you in the right direction.  

Will You Need Minimum Credit to Apply? 

Generally speaking, to be approved for down payment assistance, you first need to pre-qualify for a home loan. This requires a certain level of credit worthiness, but those requirements can vary from lender to lender. If you have gotten pre-qualified for a mortgage loan, that’s an important first step. If not, check with your financial institution to find out if you’re able to get pre-qualified. 

If your credit isn’t in great shape, consider taking steps to repair it to the best of your ability before getting into a house. Down payment assistance is granted to those who are considered a good credit risk, with credit scores within a certain range and an acceptable debt-to-income limit (as viewed by the lender or grantor).  Consult with a trusted financial advisor before you even begin your search, if possible, to go over all your options and help get your credit into optimal shape before applying for mortgage pre-qualification. 

Does the Assistance Apply for Different Types of Loans? 

If you have a VA mortgage loan, you likely won’t be required to put down a down payment at all, but DPA funds can help give you additional equity into the home or be put toward the cost of closing costs. If you have an FHA mortgage loan, check with state and local agencies to see what may be offered for DPA. If you have already pre-qualified for a conventional mortgage, usually your credit score is a little higher, and you are seen as a very good credit risk by lenders. If you meet the other requirements provided by the grantor or lender of the DPA funds, you are likely eligible for down payment assistance.