The struggles of home ownership are not exclusive to low-income buyers. Even those who can afford to pay their monthly mortgage have a dilemma of their own. This takes the shape of money that’s equivalent to 20 percent of a property’s purchase price, something that a buyer is obliged to provide at closing.
The dreaded down payment – it used to be the one thing that stood in the way between a middle-income buyer and his dream home.
Well, not anymore. Federal housing organizations, major financial companies, lenders, and nonprofit groups are working together to come up with down payment assistance (DPA) programs in different states all over the country.
Before you argue that DPA only works for borrowers with incomes below median levels, allow us to make a case in its favor.
DPA is varied
A joint analysis made by RealtyTrac and Down Payment Resource has identified 2,290 DPA programs currently available to prospective homeowners. Given this figure, it’s quite possible to find a program where a particular middle-income buyer can qualify.
DPA can save you money
A HousingWire article published findings from a study on savings brought about by qualifying for down payment assistance. The study indicated an average savings of $17,766. The buyers themselves saved an average of $5,965 upfront at the down payment stage to reach this figure.
This strategy also helped to reduce the amount of money the borrowers owed lenders, allowing them to save an additional $11,801 in monthly installments over the life of the loan.
So, why doesn’t everyone know about it?
The problem lies in the fact that not everyone is aware of the down payment programs that exist in their city or suburb.
Part of the reason for this is that most DPA programs are fragmented. It comes from different sources. And more often than not, there’s no physical venue or online portal containing a list of down payment assistance options available in a specific state or county.
The lack of a reliable, government-backed resource dedicated to DPA means people will have to look for the information themselves and verify their validity. Not all lenders proactively discuss down payment assistance with clients. Just check out this excerpt from last year’s America at Home survey:
“Additionally, although mortgage rates remain historically low, a generally steady rise in home prices is outpacing income growth, leading homebuyers – especially first-time buyers – to search for ways to build up a down payment. However, nearly 40 percent of respondents have received “nothing at all” in terms of information about down payment assistance programs for middle-income homebuyers, programs that could provide thousands of dollars to help bridge a savings gap.”
How do I find DPA programs?
Your local housing agency is a good place to start. If you plan to purchase a home within the same county but at a different suburb, they can fill you in on what programs are available. Now, if you already have a pending home loan application, go back to your lender and ask if there are DPA programs you can qualify for.
Should you be interested in moving to another state, check out our DPA website for an updated list of assistance programs and grants.
Justin McHood is America's Mortgage Commentator and has been providing expert mortgage analysis for over 10 years.
