The hardest part about buying a home is often the down payment requirements. Buyers often qualify for financing, but lack the necessary funds to put down on the home. This leaves them incapable of purchasing a home. Luckily, there are down payment assistance options, such as the NHF Sapphire Grant Down Payment Assistance Program. As the name suggests, this grant helps buyers secure the necessary funds for a down payment.
How the NHF Sapphire Grant Works
The down payment assistance program, NHF Sapphire, provides you with up to 5% of your loan amount in down payment funds. It is a grant, which means you never have to repay it. You do not have to be a first-time homebuyer to qualify for the program, either. The NHF program is available in multiple states, each of which has their own income limits for the program. Generally, the limits are for moderate income families, so many people could qualify. Borrowers must use some type of government financing in order to obtain the grant, though. This includes USDA, VA, and FHA loan types. The loan must be a 30-year fixed in order for you to be eligible.
Qualifications for the Grant
Aside from the type of financing you use, you must meet certain personal qualifications in order to qualify for the grant. Most importantly, you cannot make more than 115% of the average median income for your area. You can find the limits for your area, here. This means strictly the income of the borrower and co-borrower – they do not consider total household income for eligibility. You also need a credit score of at least 620 and a debt ratio lower than 47%, in most cases. Some underwriters can grant exceptions for those with a debt ratio higher than 47%, but lower than 50% with other compensating factors.
In any case, every borrower must provide a 12-month housing history. If you have a mortgage, you must show timely payments of the mortgage. If you rent, you must obtain proof of timely rent payments from the property owner. If you do not have a housing history, meaning you lived rent free, you must provide proof of this arrangement from the person who allows you to live with them without paying rent. The program is only available for owner-occupied properties and only on 1 to 2 unit properties. Multi-unit properties beyond 2 units do not qualify.
Using the Funds
Borrowers can use the Sapphire’s grant funds for two things:
- Down payment
- Closing costs
This helps those borrowers who take out a VA or USDA loan, as they do not require a down payment. However, any loan has closing costs. With the ability to obtain up to 5% of the loan amount in a grant, this could cover a large majority of the closing costs.
Shopping Around
It is always a good idea to shop around for the best deal for a loan, even if you receive assistance in the form of a grant. There is no reason to overpay for closing costs or pay a higher than necessary interest rate. Shop around with different lenders and figure out which program works the best for you. For example, if you purchase a home in a rural area, consider the USDA loan. If your household income does not exceed the maximum allowed, you can secure a loan with no required down payment and have your closing costs paid for you. The same is true for a VA loan, except you do not have to live in a rural area – but you do have to be a veteran.
If you end up with an FHA loan, you can use the grant money for your down payment. Since the FHA requires 3.5% down, you could have the entire amount gifted to you. This leaves you with just the closing costs to pay. When you shop around, you can find the lowest closing costs available for your situation. This way you can minimize the out-of-pocket expenses you incur.
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