Accumulating down payment money for a house is important, but can be challenging, especially for millennials bogged down in massive student loan debt. But don’t despair. Help is available through down payment assistance programs — in other words — free money.
The Federal Housing Administration, or FHA, along with the Veterans Administration (VA) and some other government-backed loan programs already provide the opportunity to qualify for a mortgage for much less than 20 percent down. These government-backed programs are well known to lenders and real estate agents.
Lesser known are the down payment assistance programs around the country. These programs are designed to help you meet minimum down-payment requirements or make homeownership more affordable by adding to what you have already saved. They are often, but not always, restricted to first-time homebuyers. Each state administers its own program with its own requirements.
The money available could be a grant or a loan. You will be required to live in the home for a certain period of time, often 36 months.
Down payment assistance programs are targeted at low- to moderate-income homebuyers, but some middle-income buyers may qualify. In some states, qualified homebuyers must earn at or below 80 percent of the median income for the area. Some states allow an income of more than 100 percent. The cost of the home also figures into the equation. Some states set the amount available to you at a percentage of the cost of the home being purchased, while other states set a specific dollar cap.
A little more help. Fannie Mae offers a first-time homebuyer program called Home Path Ready Buyer with help amounting to 3 percent of closing cost assistance in exchange for taking a financial management education course.
Another program not limited to new homebuyers is the multi-state program from the National HomeBuyers Fund which offers grants for down payments or closing costs.