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Down Payment Assistant Programs

You have found your dream home and you need help coming up with the down payment. There are programs out there to assist you in doing just that.

A down payment is the amount of money you must come up with out of your pocket before qualifying for a mortgage. It is a fraction of the total cost of the home. The down payment used to be about 20%, but in following with the trend to make home buying more accessible to more people, that number has dropped. Now days, the down payment can be as low as 2% of the purchase price.

Down payment assistance programs enlist the participation of nonprofit organizations in a bid to help low income families cover the cost of the down payment along with closing costs and other upfront cash requirements. Today 1/5 of borrowers use a down payment assistance program.

These programs usually have the seller provide a home buyer with cash for a down payment. By the seller taking part in this program he can attract a larger number of home buyers to his property.

There are administrators of down payment assistance programs that oversee the transfer of monies. They usually take a piece of the deal through a percentage of the transactions, usually 1% or a flat fee.

There are some excellent programs and some dubious ones. It is important to confirm that the organization that you are dealing with is reputable. You should restrict your dealings with the groups that belong to HGPA (Home Gift Providers Association). They are required to adhere to a set of practices and code of ethics.

If you suspect an unsavory group you can ask to see their records of financial stability or ask about partnerships with community organizations or businesses. Ask if it endorses the practice of allowing borrowers to use their down payment to pay off bad debts, judgments or liens in order to qualify for loans. Stay alert to any signs of them giving kickbacks to real estate agents, mortgage brokers or anyone else involved in the mortgage transaction.

Sometimes a home seller will inflate the price of their home to compensate for the gifted money. This is not good for a buyer who can end up paying more than market value for a house. A real estate agent can help you determine if a home is over priced.

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