If you are thinking of buying a home and you need some financial assistance, then a down payment program could be what you need. The program can be useful during your home buying process. Let’s discuss what down payment assistance programs are and how they work.
First, What is a Down Payment Assistance Program?
When you want to purchase a home, the general rule of the thumb is you pay at least a minimum of 20%. For people who can’t afford, this is where these assistance programs come in. They’re designed to offer financial help to home buyers that don’t have enough money to put down when buying a house.
There are several kinds of down payment programs offered by both the state and housing non-profit organizations. The most common types include:
• Tax credits
The government and some housing finance agencies may offer some tax credit allowances to home buyers who meet specific requirements. Although this is not directly an assistance program, it can minimize the tax burden and give you some cash you need to help you buy a home.
• Down payment grants
These are funds that you don’t have to pay back so long as you occupy the house for the stated period. Mostly, that’s how they work. Occupancy is a must requirement, although other rules may vary.
• Second mortgage loans
With this kind, you’ll take your first loan to cover the price of the house and then take a second one to cover the upfront investment. Regulations can vary depending on your lender’s term. But many of these loans are offered by the state and local housing agencies.
How Do These Programs Work?
Like earlier said, funds are administered by the government, housing agencies, or non-profit organization through your lender. Once you qualify, you’re given a set of money which you can use to pay for the down payment or closing cost of a home. If you’ve received a grant, then you have to stay in that home for the agreed period. However, if your assistance is a loan, then you have to pay in full.
Down payment assistance programs come in handy for people who need some help buying a house. But, before you apply for one, it’s wise that you speak to a financial expert to get advice on whether they’re right for you.