Whenever it comes to down payment assistance on a home, the general rate that has to be handed over is a minimum of 20%. If you don’t think you can afford that, however, don’t despair. You may be able to get help through a down payment assistance program. These typically have strict guidelines regarding who qualifies. However, they’re worth looking into if a lack of cash is an obstacle to buying a home.
How does it Work?
Down payment assistance programs can be administered by a local or state housing authority, a non-profit organization or directly through your lender. They provide a set amount of money to qualified homebuyers. Homebuyers can use the money to cover their down payment or closing costs.
The money you receive through the program may be considered one of three things: a grant, an interest-free loan or a debt you pay off in the future. Typically, you’ll have to agree to live in the home and use it as your principal residence for a certain period of time to avoid having to repay the money. If your down payment assistance is treated as a loan, it would have to be paid in full if you sold the property or finished making all of your mortgage payments.
How Much Funding Is Available?
The amount of money you can get through a down payment assistance program depends on the state that’s administering the funds. Some states base your award on the home’s sales price while others offer a flat amount. In Virginia, for instance, the amount can go as high as 20% of the purchase price. New York, on the other hand, caps assistance at $15,000, for more information check out https://onqfinancial.com/down-payment-assistance/washington-programs/
Does credit score matter?
Down payment assistance programs are designed to help homebuyers who might otherwise be shut out of the market. Anyone who has already been preapproved for a mortgage can qualify for aid. During the preapproval process, the lender will go over your income, expenses and credit history.
If your credit’s not in the best shape, it’s a good idea to work on improving it. Ideally, you’d do that before seeking pre-approval or applying for down payment assistance. The best way to do so is to pay all of your bills on time. Late payments can be extremely damaging to your score. You’ll also benefit from paying down your existing debts and limiting your applications for new debt until you’re able to get pre-approved.