DPA or Down Payment Assistance is a mortgage option for first time buyers or repeat buyers who lack significant resources to put 3 or 10 or 20% down. Typically, these programs have restrictions on income, debt ratio’s and credit scores.
In previous articles on this site I have outlined some low down payment options such as Veterans Loan, USDA loans and the Mass Housing 100. In the event that a prospective home buyer was not veteran or did not qualify for the other two loan programs here is some information I hope you find valuable in regards to Down Payment Assistance.
For Barnstable county residents who make below $98,500 there is a niche FHA loan product called “Within Reach” that is offered by Land Home Financial one of my top FHA lenders. The way the program works is that the borrower can get a 3% Grant of down payment assistance. The grant can be used towards the standard FHA 3.5% down payment or closing costs. The grant is truly free money and does not have to be repaid post-closing.
FHA loans also will typically allow up to a 6% seller concession towards closing costs and gifts are allowed as long as they are from relatives or family members.
If a borrower were to obtain the 3% grant, a concession towards closing costs and a small gift the American Dream of homeownership could be achieved with very little money out of the borrower’s own pocket.
The interest rate on this product is typically about one point higher than a regular FHA loan. FHA loans do have PMI for the life of the loan so borrowers will need to refinance out of this loan into conventional product if they want to remove the PMI.
The next loan program to be aware of is the “Power Purchase” loan that mimics the Freddie Mac Home Possible program. Home Possible is a 97% loan to value or 3% down loan. The Power Purchase loan offers down payment assistance in the form of a 2% grant. No repayment required. In summary the Power Purchase program ends up being 1% down from the borrower and a 2% gift to cover the 3% down.
The 1% from the borrower can be a gift.
For both the Within Reach loan and Power Purchase loan, borrowers will need to have a 620 FICO Score and cannot own other property.
As always, this information does not represent an offer or commitment to enter into a loan agreement. Feel free to reach out to me for more information.
Happy Home Buying!
Executive Mortgage Banker
NMLS Mortgage Loan Originator ID: 1020051
William Raveis Mortgage LLC NMLS ID #2630
Email [email protected]