When thinking of buying a house, a first question is often How much do I need for a down payment? Ideally, a down payment is 10 percent to 20 percent of the purchase price, which will reduce your mortgage and lower your monthly payments. But in reality, many buyers, especially first-timers, don’t have that kind of money. That’s where down payment assistance programs come in.
Who can use down payment assistance?
Some down payment assistance programs are available only to first-time buyers; others do not make this distinction. Each has its own stipulations for location, income, credit-worthiness, and size of family, among other factors. If you do not have a down payment or need additional money to increase your down payment, many programs like the ones below exist to help.
Federal Housing Administration
The FHA is a government agency that insures mortgages across the country. Begun in 1934, it ensures more than 47.5 million homes and is the largest worldwide insurer of mortgages. FHA-backed loans can cover up to 100 percent of the purchase price of the home. The down payments are provided through either a nonprofit or a city-, county-, or state-backed program, to make home ownership more attainable.
Gifts and grants
Nonprofit 501(C)(3) organizations offer down payment assistance but typically require the cooperation of both the seller and buyer, meaning terms need to be negotiated prior to making an offer. These are classified as gifts or grants, with no repayment necessary, and there are no stipulations on how long you must live in the home. There may be tax implications for receiving these gifts so a consultation with a qualified accountant is suggested.