In celebration of National Homeownership Month, we’re sharing the heartwarming story of Jackie, a resilient and determined individual who overcame numerous challenges to achieve her dream of homeownership with financial support from down payment assistance (DPA) programs. Her journey serves as a shining example of how homebuyer assistance can transform lives and provide stability for those who need it most.

Jackie’s Homeownership Journey

Jackie’s homeownership journey began back in December 2019, when she made the difficult decision to transition her ailing mother —  whom she had moved into a larger, accessible home to care for — into an assisted nursing facility. Unable to afford the rent alone, she was unhoused until she was invited to move in with a friend.

As Jackie began to search for a new place to call home, she quickly realized that rent in her area had been skyrocketing even faster than the price of houses, making homeownership a more desirable option because it would provide her with long-term housing cost stability and the benefit of earned equity. Then and there, Jackie made the decision to buy a home of her own. 

Jackie faced numerous financial obstacles to homeownership, which she overcame with hard work and resolve. After a divorce that left her with no credit score because everything had been in her ex-husband’s name, she built her credit by securing a starter credit card and diligently paying off her entire balance each month. She was also able to increase her income by securing a work-from-home role during the early days of COVID.

Jackie’s homebuying journey took a significant turn when her friend suggested she reach out to Pasco County about homebuyer assistance programs. After meeting the benchmark program requirements of building up $6,000 in savings and completing the Suncoast Housing Connections homebuyer education course, Pasco County provided Jackie with a list of real estate agent and lending professional partners who could help her complete her journey.

That’s how Jackie met Pam Marron, a mortgage broker with Innovative Mortgage Services, Inc. who is passionate about connecting homebuyers with affordable financing programs. Determined to help Jackie realize her dream of homeownership, Pam leveraged Pasco County Community Development’s DPA offering with Freddie Mac’s BorrowSmart℠ program via United Wholesale Mortgage to secure affordable financing.

Ultimately, Jackie was able to secure $15,000 in DPA from Pasco County in the form of a 0% interest “silent second” loan, which she will repay over time. Additionally, Jackie received a $2,500 grant from Freddie Mac, which is completely forgiven. These combined efforts made homeownership a reality for Jackie, providing her with a sense of freedom, independence, and the knowledge that every mortgage payment contributes to building equity.

Happily Ever After

Thanks to homebuyer support from Freddie Mac and Pasco County Community Development, and the dedication of industry professionals like Pam Marron, Jackie was able to overcome the obstacles standing between her and affordable homeownership. Her story serves as a beacon of hope, reminding us all of the incredible impact that can be made when individuals, communities, and organizations come together to create pathways to affordable and sustainable homeownership.

Looking to purchase a home?  Find down payment programs in your area today and see if you’re eligible!

How do you go from dreaming of owning a home to holding your first set of keys? For most new buyers, the down payment is the biggest hurdle, but maybe it doesn’t have to be.

There are currently over 2,200 homebuyer assistance programs available in the U.S. Let’s take a look at the 3 most common types of programs and how they work.

What are homebuyer assistance programs?

They come in various forms, such as loans, grants, tax credits and more. These programs provide eligible homebuyers with down payment help, cover closing costs and may get you into a home sooner than you would have otherwise.

You can work with a participating lender to apply and access down payment help, or you can contact the agency offering the program.

How do you qualify?

Both you and the home you are purchasing must be eligible. Homeownership programs are for owner-occupant buyers only—no investment properties. You must make a minimum investment, qualify for a first mortgage and complete homebuyer education. Common eligibility factors include the home’s sales price, homebuyer income and homeownership history.

Your occupation can help give you a boost. There are often additional benefits, or even entirely separate programs, for educators, protectors, health care workers, veterans and households with disabled members.

Do you have to be a first-time homebuyer?

It’s important to know that a first-time homebuyer is defined as someone who hasn’t owned a home in three years. So, if you owned in the past but are renting now, you may be a first-timer again! Plus, across our database of programs, 38 percent don’t have a first-time homebuyer requirement.

3 most common types of programs

1. Down Payment Assistance Programs

The largest category of programs—74% to be exact—are down payment assistance and closing cost programs. Down payment assistance (DPA) is an umbrella term for programs offered by federal, state, county or local government agencies, nonprofits and employers. DPA programs come in 2 primary forms:

• Grants which do not have to be paid back
• Second mortgage loans with varying payback or loan forgiveness provisions

Down payment assistance grants

Grants are gifts at closing provided by an eligible third party to help cover the cost of some or all of your down payment or closing costs. They do not have to be repaid by the homebuyer, do not incur a lien on the property being purchased, and have no associated note or deed.

Second mortgage programs

Many down payment programs come in the form of a second mortgage, or subordinate lien, with varying payback provisions.

Repayable DPA programs provide down payment funds at closing often as a 0%-interest second loan, but some may accrue interest and some may be amortizing loans. These programs typically range from 5-year to 30-year loans with varying repayment terms, which may start immediately or kick in after a predetermined period.

Deferred or silent second programs postpone repayment of the down payment assistance until the borrower sells, refinances, rents or moves out of the home. Buyers who plan to live in the home for several years will benefit most from the home’s appreciation in value.

Forgivable second mortgage programs forgive some or all of the DPA amount. When and how much of that down payment help is forgiven may vary, but it’s common for a percentage of the loan to be forgiven each year for a predefined number of years. However, if the program’s conditions are not met—for example, the buyer moves out of the home—the loan must be repaid, sometimes with interest.

2. Affordable First Mortgages

Many larger housing finance agencies, particularly at the state level, offer first mortgages to accompany their down payment assistance programs. They are often funded by state housing finance agencies and may subsidize portions of the interest to offer rates below what the normal market can provide, helping lower your buying costs and monthly payments. They may also have reduced closing costs and fees and waive mortgage insurance requirements.

The USDA also has 2 first mortgage programs, the Rural Direct Loan and the Rural Guaranteed Loan, both primarily used to help low- and moderate-income individuals or households purchase homes in rural areas. Funds can be used to acquire, build (including purchase and prepare sites and provide water and sewage facilities), repair, renovate or relocate a home.

3. Mortgage Credit Certificates (MCC)

This annual federal income tax credit is designed to help first-time homebuyers offset a portion of their mortgage interest on a new mortgage as a way to help qualify for a loan. As a tax credit, not a tax deduction, the MCC helps reduce your annual taxes dollar for dollar.

The mortgage credit allowed varies depending on the state or local government that issues the certificates, but (in most cases) it is capped at a maximum of $2,000 per year by the IRS. MCCs can often be used alongside another down payment program.

Search for programs in your area that may be a fit for your situation. You can also look up your state’s Housing Finance Agency and view available programs. View the agency’s list of participating mortgage lenders and interview a few to find the best fit for you.

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In a highly competitive market, it’s important to investigate all of your options, including down payment help. Here, we debunk our final three surprisingly common myths about home financing and down payment assistance.

Make sure to check out Myths #1 – 4 and Myths #5 – 7 to get the full list.

Myth #8

Down payment assistance dollars are never forgiven.

Every state in the U.S. has some form of homebuyer assistance available, and Down Payment Assistance (DPA) programs make up 73 percent of the programs offered. DPA programs may come in the form of a repayable second mortgage loan or a non-repayable grant.

Grants are typically structured as gifts delivered at closing that do not have to be repaid. The funds help cover some or all of the down payment or closing costs and provide a unique upfront buying power for homebuyers.

With repayable second mortgages, some accrue interest, while others are amortizing loans. They typically range from 5-year to 30-year loans with varying payback provisions. The repayment may start immediately or kick in after a predetermined period of months or years.

Regardless of the repayment terms, DPA programs still give you an opportunity to get into a home that may not have been affordable otherwise. That’s especially important in markets where rents are quickly on the rise.

Myth #9

Sellers won’t accept layered financing.

Are you worried the seller will balk at a contract with financing beyond a typical first mortgage? While that might happen, the real issue at hand may be the fear of a longer closing time or a complicated closing.

In order to improve the timeline and reduce any seller fears, you should complete homebuyer education early, submit loan documents to the lender promptly, and do your part to expedite the process from the beginning.

Also, keep in mind that DPA programs may cover items like closing costs, which helps buyers compete on price and seller-paid costs. When agents and sellers open their minds to buyers taking advantage of these programs, it can help all parties involved.

Myth #10

It’s advantageous for buyers to put down more of their own money for a bigger down payment.

Although there are benefits to putting more money down on a home, it’s not necessary.

DPA programs give you a chance to retain some of your savings for long-term homeownership success. You can move into your new home with a financial cushion in place, some skin the game, and critical homebuyer education under your belt.

Bottom line: The biggest obstacle to homeownership is the down payment. Whether you’re planning to buy now or later, you should know the benefits of down payment programs and check to see if you’re eligible.

That wraps up our top 10 down payment assistance myths. Don’t miss Myths #1 – 4 and Myths #5 – 7 to get the full story.

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Are you frustrated with the home buying process? You’re not alone. According to a survey by Realtor.com, 72% of first-time buyers are hoping to buy this year, but a competitive market and other challenges, such as saving for a down payment, are keeping them sidelined.

We know the vast majority of buyers search online at some point in their home buying process. Before you start searching for your dream home, here are 7 key facts about home buying you should know.

1. You don’t need 20 percent down.

Of course there are advantages to putting down 20 percent or more on a home, but it’s not a necessity. As a matter of fact, low down payment options have been around for a long time, and data shows that low down payment loans with sound underwriting (loan is fully documented, income verified) are just as successful as loans with large down payments. Plus, using a low down payment loan may get you into a home now (instead of 3 years from now), leaving your savings for other home buying expenses. 

2. Go back to school (for a day).

Did you know there are education courses that can help you prepare for homeownership? Homebuyer education is typically required when using a homebuyer assistance program, but any buyer can benefit. In these courses, you’ll learn about the home buying process, common mortgage terms, budget planning, ways to improve your credit and more. Plus, studies have found that simply participating in these courses helps buyers avoid delinquencies and significantly reduces the risk of foreclosure.

3. Find an agent.

A real estate agent will be an important member of your home buying team. Even if you plan to find a home on your own, that’s only one part of the process. A real estate agent will be there to help you navigate contracts between you and the seller and set up important things like the home inspection. As a new buyer, the process can be overwhelming, and you’ll benefit from the expert help. 

4. Find the right lender.

Your mortgage lender will help secure your home financing, and there are many types of banks and lenders who can help. Unfortunately, according to the Consumer Financial Protection Bureau, nearly half of homebuyers don’t shop around for a mortgage lender. Like you, your finances and home buying goals are unique. It makes sense to shop around and interview your lender for the job. We’ve outlined a few important questions to ask your mortgage lender that will help you get started.

5. Your credit score matters.

Your credit score will help determine the type of loan you get, as well as the interest rate and points paid. The better your score, the more affordable loan you can get, often with more options for a low down payment. Review your credit report, make adjustments and get prepared so you can enjoy the lowest interest rate possible and save cash over the life of your loan.

6. Down payment programs offer savings.

Many homebuyers don’t know there are homebuyer assistance programs that can help get them into a home sooner than planned and provide a valuable cash cushion for other expenses. You could save on your down payment and closing costs, or even get ongoing tax credits. Ask your lender and real estate agent about these programs and do some research to find out what might be available where you want to buy.

7. Don’t forget to budget closing costs.

Most buyers focus on saving for a down payment, but your closing costs can run you another 2 to 5 percent. It’s important to factor in these costs so you are prepared for the closing table. Ask your agent about negotiating these costs with the seller. In addition, some homebuyer assistance programs can help you cover your closing costs.

For more useful home buying tips, check out our blog and be sure to subscribe to our mailing list.

If you’re hoping to purchase a home, but struggling to save for a down payment, you’re not alone. Access to a down payment still remains the number one obstacle for homebuyers, but we have some good news for you…

Down payment help is available. 

Down payment assistance can make a significant impact to your home buying bottom line, and it’s never been truer than in today’s market. According to our latest Homeownership Program Index, there are over 2,000 homebuyer assistance programs available across the country. Yet, many homebuyers don’t know if they’re eligible for assistance or if programs are available in their area.

In fact, a survey by NeighborWorks America found that “less than half of non-homeowners are aware of any home buying education or down payment assistance programs in the communities”.

So, how do these programs help you? Let’s review the top five ways you can benefit:

1. Helps you purchase a home sooner.

Many buyers remain on the sidelines, saving money and watching interest rates. Down payment programs provide grants (gifts) or forgivable loans that help with your down payment and closing costs. These resources can immediately build your home buying power and help you take action sooner than you thought possible.

2. Helps offset FHA premiums and mortgage insurance.

Over the years, FHA has been the primary place for many first-time homebuyers to get a low-cost, low down payment loan. However, these affordable loans also include premiums (loan fees) and mortgage insurance to manage the risk on the loan. You may not know that your FHA loans can be combined with a down payment assistance program, helping offset the costs of premiums and mortgage insurance.

3. Helps community service employees live close to their job.

Many community service employees, such as police officers, firefighters and educators can’t afford to purchase a home in the community where they work, especially in high-cost areas. There are several targeted down payment programs that help keep valuable employees in the community, as well as reduce commuter costs.

4. Gives you an important cash cushion.

In the National Association of REALTORS® 2021 Profile of Home Buyers and Sellers, 61 percent of first-time homebuyers used savings to fund their down payment. Using a down payment program can help with the upfront cash for the down payment and closing costs, which leaves your savings for things like home maintenance and other homeownership expenses.

5. Provides valuable homeownership education. 

In order to qualify for a homebuyer assistance program, you will most likely be required to complete a homeownership education course. This course typically covers the logistics and steps of buying a home, as well as financing basics, homeownership responsibilities and contract obligations. This valuable, upfront education helps you prepare for the home buying process and sets you up for long-term homeownership success. Plus, many programs accept online homeownership education, making it easy for you to complete the course on your own time.

Ready to find out what programs may be a fit for you? Check out our program search to get started.

Spending hours online, searching for dream homes, has become a new favorite pastime. But when it comes to researching a home loan and finding a mortgage lender? Not so much.

The best first step is simply being prepared. Knowing the right questions to ask can make the home loan process a little less overwhelming and help create a smooth path to homeownership.

If you’re not sure where to start when it comes to securing home financing, you’re not alone. According to the National Association of REALTORS®, the first step for 44 percent of homebuyers in 2020 was to begin searching for homes online, while only 7 percent contacted a mortgage lender. As a matter of fact, studies have shown that nearly half of homebuyers don’t shop around for a mortgage lender at all. They just go with the first one that comes their way.

Knowing where you stand financially gives you an advantage and could get you into your dream home even sooner than originally planned. Use these conversation starters to interview mortgage lenders before you start searching for a home. Asking these important questions will help you zero in on the lender that’s right for you, while also providing a better understanding of the home loan process.

What are your pre-approval and closing processes?

Make sure the lender’s timelines line up with your home buying goals. How quickly can the lender pre-approve you for a home loan, and what information will be required? Find out how long the pre-approval will be valid. Typically, it’s good for 60 – 90 days and can be updated as needed, but it’s always a good idea to verify that with the lender.

Know when your credit will be pulled, and don’t open or close any accounts during that time or take out credit for any other large purchases. Ideally, you should review your credit report first for any errors or issues you’ll need to address that may negatively impact your credit score. You can obtain a free report annually from AnnualCreditReport.com.

You should also ask about the lender’s closing process. Where will the closing take place? Do they work with a particular law office or do they do it in house? Some lenders may offer a closing at your home or even online.

How do you communicate with homebuyers?

Communication throughout the homebuying process is essential. You never want to be the last to know. 

Ask the lender how they will manage your loan process and all the steps along the way. Will you have an account representative who will inform you of updates? Do they offer an online system with notifications?  When considering the right lender for you, think about how you prefer to communicate and what works best for your schedule.

What will be my down payment requirement?

Your minimum down payment will depend on the type of loan a lender recommends for you. Talk to the lender about what you have saved, how much you’d like to put down, and your goals for a monthly payment.

The good news is that 20 percent down is not required. Several loans today offer a 3 – 5 percent down payment. FHA loans, popular with first-time homebuyers, have a 3.5 percent minimum down payment. And, if you are a veteran or member of the military, you have access to VA loans which offer zero percent down.

Do you participate in any down payment assistance programs?

There are more than 2,200 homeownership programs available across the country that can help you save on your down payment and closing costs. State and local housing agencies administer a wide range of programs, including grants, second mortgages, affordable first loans and tax credits. 

Most homebuyer programs have multiple participating lenders. Find out what special low down payment programs and accompanying down payment assistance programs a lender may offer. Some lenders offer their own proprietary down payment help as well.

Check out the programs available in your market and discuss these with your lender and real estate agent.

What fees will be included in my loan, and what fees will be due at closing?

Lender fees will be included, no matter what loan product you choose. These may include origination fees, the cost of writing the loan, and closing costs. Fees are just as important as your interest rate, and there are ways to lower your interest rate with additional fees.

The cost of your loan is determined by several factors, including your loan terms (15 years, 30 years, etc.), your credit score and your loan type. Ask your lender to outline fees based on your personal situation and the different loan options.

According to the Know Before You Owe mortgage disclosure rule, your lender should provide you with the Loan Estimate and the Closing Disclosure to help you understand your fees. The rule also requires that you get three business days to review your Closing Disclosure and ask questions before you close on a mortgage.

A final reminder for homebuyers…

Interviewing lenders before you begin searching for your dream home can help improve your bottom line. Research by the Consumer Finance Protection Bureau (CFPB) found that a borrower taking out a 30-year fixed rate conventional loan could get rate quotes that vary by more than half a percent. That could translate into saving thousands on your mortgage.

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Learn how we help our business partners connect homebuyers to down payment help they need to buy a home.

Homebuyer checklists can be overwhelming, especially for first-time buyers. Should you shop for a home on your own, or find an agent to help? Are your finances in order? How do you find the right lender, and how much do you need for the down payment?

If it feels like there’s a long list of obstacles standing between you and owning a home, homebuyer education or counseling may be a good first step.

It’s true this step may add additional time to the homebuying process, and in today’s competitive market, it may feel like you don’t have time to spare. But data shows that homebuyer education and counseling build successful long term homeowners. Plus, most down payment programs require the recipient to participate in these courses, so you’ll be a step ahead.

What’s the difference between homebuyer education and homebuyer counseling?

Homebuyer education is a course that covers the basics of homebuying, such as finding out how much home you can afford, choosing the best loan program, securing the down payment, and what to expect before and after closing. Courses range from four to eight hours long and can be completed in one or two days, either online or in-person.

Homebuyers with unique financial circumstances, or first-time buyers looking for a deeper dive into the homebuying process, may benefit from a housing counselor. A counselor can serve as a home buying coach, helping you understand the best plan for your individual situation. They can guide you through the homeownership process, assist with credit issues, review different loan terms, and help find homeownership education courses.

Is homebuyer education or counseling required?

If you’re looking for down payment help, most down payment programs require the recipient to participate in homebuyer education, most often through a HUD-approved counselor or agency. The type of course and time investment may vary from program-to-program. Some courses are offered in person and may require a Saturday commitment, but there are online options available, so you can complete the course when it’s convenient for you.

Even if you aren’t using a down payment program, you can still participate in an education course or counseling. Some employers offer homebuyer courses as a benefit to employees. And the Urban Institute makes the case for the broader benefits of counseling, as a tool that could help renters and landlords address financial instability brought on by the COVID-19 pandemic.

What does homebuyer education and counseling cost?

Most courses cost approximately $75-$100. With that fee, you also get access to planning documents, videos and other resources after the course is completed.

Some education courses or counseling services may be provided for free by a housing agency administering a homeownership program. It’s a good idea to talk to your lender or the homeownership program provider about the options available.

How to find a homebuyer education course or counselor near you.

You can find local counselors listed by state on HUD’s website.

Another option is to complete a Down Payment Resource homeownership program search. Click ‘Learn More’ and find a link to ‘Approved Education Providers.’

Even if you’re not a first-time buyer, homebuyer education and counseling can be beneficial. The homebuying process and requirements are constantly changing, and new homebuyer programs are being added everyday. Bottomline, when it comes to buying a home, there’s no such thing as being over-prepared.

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Are you an industry professional? Download our latest Down Payment Report for the data and news on first-time homebuyers and residential down payments.

Have a success story to share? Please contact us at info@downpaymentresource.com.

June is National Homeownership Month, where we celebrate the important role homeownership plays in neighborhoods and communities across the country.

Owning a home has long been the American dream, and even in this competitive market, homebuyers shouldn’t be discouraged. Whether you’re hoping to buy now or planning ahead, these steps will help clear the path to homeownership.

Last year, we conducted a six-part webinar series for homebuyers*. We discussed first steps, dispelled common myths, and provided a plan for successful homeownership.

The Path to Homeownership Part 1 – The Housing Counselor

Housing counselors not only help prepare buyers for the homebuying process, but also how to be a responsible homeowner.

In part 1 of our webinar series, we explore the value of housing counselors and the role they play in credit management, budgeting, and planning for mortgage qualification. You’ll also hear from Sylvia Alvarez, founder and Executive Director of the Housing and Education Alliance (HEA), regarding the first steps homebuyers can and should take as they prepare for homeownership.

The Path to Homeownership Part 2 – The Loan Officer

When considering homeownership, there are 3 people needed for every homebuying team. The loan officer is there to help homebuyers navigate the mortgage process and should be the second step on the path to homeownership.

Part 2 of our webinar series breaks down what homebuyers can expect when working with a loan officer. We discuss prequalification vs. pre-approval, mortgage insurance, and critical milestones in the qualification process.

Another thing to remember is that you don’t need 20 percent down to buy a home. Homebuyers should search for down payment programs in their market and ask loan officers what down payment assistance programs they offer.

The Path to Homeownership Part 3 – Mortgage Options

The number of home financing options available can be overwhelming, especially if you’re a first-time buyer.

This session in our webinar series covers the many mortgage options available, down payment requirements among them, and how homebuyers can determine the best options for them.

You will also hear from Sandra Heidinger, an Affordable Lending Manager in the Single-Family Affordable Lending and Access to Credit organization at Freddie Mac. Working collaboratively with lenders, non-profit agencies, and government agencies, Sandra creates outreach initiatives designed to increase homeownership opportunities and preserve homeownership for under-served families.

The Path to Homeownership Part 4 – Homebuyer Education

Even soon-to-be homebuyers who consider themselves experts should take advantage of homebuyer education. These courses often come with additional benefits such as lower interest rates, down payment assistance, and more.

Online options, such as eHome America, allow homebuyers to do education courses at home and at their own pace. Homebuyers will also have access to planning documents, videos, and other resources after the course is completed.

Part 4 of our webinar series explores the value of homebuyer education and how these courses help to build successful long term homeowners.

The Path to Homeownership Part 5 – The Real Estate Agent

Another important member of any homebuying team is the real estate agent. Finding a real estate agent can take time, and it’s important the agent has experience with a homebuyer’s specific needs, especially if the buyer is using a down payment program.

In part 5 of our series, we’re joined by Raoul Rowe, Broker and Owner of Ready Front Real Estate and the CEO of Texas Operation Giveback INC. Raoul discusses the process of finding properties, negotiating contracts, inspections and repairs, and how the real estate agent keeps everyone working together.

The Path to Homeownership Part 6 – Successful Homeownership

Closing on a home is only the beginning of the homeownership journey. The important work happens after the papers are signed.

The final segment of our webinar series explores what life looks like after closing. We discuss what to expect immediately after purchasing a home and how to plan and budget for long term ownership.

On Demand Webinars

Check out our YouTube channel for more educational content.

Our homebuyer playlist includes all of the webinars in our Path to Homeownership series. We also have a playlist for industry professionals, a lender playlist, and a playlist for real estate agents.

*This is not a certified homebuyer education course. Homebuyers should visit the HUD website to find a HUD certified Housing Counselor in their area.

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Never want to miss a post? For more useful down payment and home buying information, be sure to subscribe to our mailing list.

Are you an industry professional? Download our latest Down Payment Report for the data and news on first-time homebuyers and residential down payments.

Have a success story to share? Please contact us at info@downpaymentresource.com.