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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Can you qualify to buy a home now? Many renters have the income and credit qualifications to buy a home, and simply need to overcome the down payment hurdle. Too often, long held myths about homebuyer programs can hold you back.

We’re here to debunk three more surprisingly common myths about down payment assistance.

(Don’t miss our first installment where we debunked Myths #1 – 4!)

Myth #5

Down payment assistance is only for inexpensive homes.   

Don’t let preconceived ideas about programs throw you off. Down payment programs aren’t just for narrowly defined homebuyers and “targeted” neighborhoods of very inexpensive homes. In fact, homes in any neighborhood may be eligible with sales price limits typically ranging from $200,000 to over $900,000 in high-cost markets.

Some homebuyer programs have income limits of up to 120 percent of the area’s median income (AMI) and higher, which can amount to well over six-figure incomes in countless markets across the country. In addition, some may offer tiered assistance dollars at varying income levels so higher incomes might yield lower assistance amounts, but higher income isn’t an automatic disqualifier. Income limits are almost always based on household size, so limits for a family of five are significantly higher than for a single person.

Myth #6

Down payment assistance is only compatible with FHA loans.

While down payment assistance programs are most commonly used with FHA loans, it doesn’t mean other loan products are off the table. Many down payment assistance programs are also compatible with VA, USDA and conventional loans.

How do you know which loan is the best fit? It really comes down to purchase price and assistance amount. For example, if you have $5,000 in down payment assistance on a $150,000 house, that’s just under FHA’s down payment requirement of 3.5 percent, so you would need to come up with a little extra to complete the down payment requirement.

However, if you have $10,000 in assistance on the same $150,000 house that brings you to more than 6 percent down. This may open the doors for conventional financing, helping you reduce your mortgage insurance and fees.

Myth #7

Down payment assistance programs require longer closing timelines.

It’s true that some of these programs may take a little longer than a typical loan to underwrite, approve, reserve funds, and deliver closing documents. However, the closing timeline must be measured from the date the full down payment assistance application is submitted, not when the opportunity is first discovered. That’s where one misconception lies.

Do yourself a favor and research these programs early. By completing homebuyer education courses and other requirements upfront, you are shaving off that time. Bottom line: you’re trading a little extra legwork to gain immediate equity and retain some of your savings.

Housing agencies who provide these programs should be considered partners and subject matter experts. Ask your agent or lender to keep you informed during the process so you meet your timeline expectations.

Be on the lookout for our next post, where we’ll debunk three more myths to round out the top 10!

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If you’re considering buying a home, you’re probably in deep in research mode right now. In fact, most homebuyers do significant online research before engaging a lender or agent. And, if you’re here, you are likely researching about the down payment for your home purchase.

Home prices, along with down payments, are increasing, but down payment assistance (DPA) programs can help make buying a home more affordable. We’re breaking down the top 10 most common myths about home financing and down payment programs.

Myth #1

DPA programs are only for first-time homebuyers.

Nope, not true. First of all, the majority of programs use HUD’s definition of a first-time homebuyer: that is, someone who has not owned a home in three years. So, if you are someone who owned before, but are currently renting, you may be a first-timer again!

Plus, not all programs specify that you must be a first-time homebuyer. Our latest Homeownership Program Index found that 38 percent of programs do NOT have a first-time homebuyer requirement. Make sure you don’t rule yourself out.

One thing that’s true for all programs? They are for homebuyers, not investors. Most housing agencies will require that the home is occupied as a primary residence in order to qualify.

In addition, homebuyers purchasing a home in a designated target area (typically for revitalization efforts) may receive special benefits such as higher assistance amounts, more lenient income requirements and the first-time homebuyer requirement may be waived. Veterans are often eligible for a first-time homebuyer waiver, too.

Myth #2

DPA programs are no longer funded.

On the contrary. We found that more than 84 percent of all programs we track have funds available for homebuyers. In fact, there are hundreds of millions of dollars in down payment assistance, grants, tax credits and affordable first mortgages available throughout the country.

Each program has a different funding schedule. Some programs are government-funded and are provided through municipal or quasi-government agencies or non-profits. Others are privately funded, and some are even sponsored by employers. Every state has a collection of programs at the state-level and hundreds of markets around the country offer local assistance as well.

Learn about the three most common types of programs.

Myth #3

It’s difficult to qualify for DPA programs.

There are many DPA program options and opportunities. The only difficult task used to be identifying what programs might be a fit for your situation. Our Down Payment Resource search tool makes it simple for you to find available options. The key is doing research early in the home buying process as well as reviewing the application criteria.

To qualify for an assistance program, both the homebuyer and the property must meet certain criteria, which will vary by program. Standard criteria include property location, type of home, sales price, household income, and homebuyer education certifications. There are often additional benefits, or even entirely separate programs, for educators, protectors, healthcare workers, veterans and households with disabled members.

Homebuyers must also demonstrate that they are financially responsible. Assistance programs have credit score thresholds and cash reserve requirements. Most programs will require a little money down from the homebuyer, as well as homebuyer education, especially for first-time homebuyers, to ensure the long-term homeownership success of each new buyer.

Myth #4

DPA programs make home financing more difficult.

Your home purchase is likely the largest purchase you will ever make. So, you want to get it right and make a wise financial decision. When you apply for and use a DPA program, it does require additional paperwork, however the paperwork is similar to what you are already doing when applying for a home loan.

Interview lenders to find someone knowledgeable about the programs in your area and willing to work with you. (Here are a few essential questions for mortgage lenders.)

Lenders who can offer these programs are called “participating lenders.” They are qualified to write the loans associated with the programs and understand how to incorporate this special financing into the home loan without complicating or prolonging the real estate transaction. This is why it’s important for to seek information about available programs prior to touring homes or even getting prequalified. A little homework upfront will ensure a smooth, successful transaction down the road.

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Economists agree that the real estate business has recovered faster than expected during the pandemic. A continued lack of inventory, low mortgage rates, and pent-up demand are all contributing factors to a robust market.

The good news for homebuyers is that down payment assistance is still available, with many program providers offering online and virtual support/education. With an average benefit of $13,000, these programs can help make the difference in achieving homeownership when competition is fierce.

In a recent appearance on the “Real Estate Coach Uncensored” show with Bernice Ross and Greg McDaniel, our very own Rob Chrane, CEO of Down Payment Resource, discussed the different types of down payment programs available and how they represent an opportunity for real estate agents and loan officers to expand their client portfolio.

Many prospective buyers are unaware of the scope of these resources or don’t think they’ll qualify. Our goal is to dispel several of the most common myths surrounding these programs.

Myth #1: They’re only for first time buyers.

Over a third of the down payment programs don’t have a first-time homebuyer requirement. Further, previous homeowners who haven’t owned a home for at least 3 years can qualify as first-time buyers.

Myth #2: A 20% down payment is always better.

Many of the programs offer a variety of down payment options which can keep prospective borrowers from draining their savings accounts, thus giving them more liquidity to handle the many unexpected costs that come with home ownership. In fact, a study by JP Morgan Chase showed that borrowers with at least 3 mortgage payment equivalents of liquidity had lower default rates than those who had more equity, but less liquidity.

Myth #3: Buyers using down payment programs are considered less appealing.

Industry professionals well-versed in these programs say that it can be just the opposite, since several of these programs cover closing costs – fees that prospective buyers often asks sellers to cover. Also, since nearly all down payment programs require homebuyer education, these buyers are more knowledgeable about the process and expenses surrounding homeownership.

As a continuation of our efforts to educate and inform, we celebrated Homeownership Month with our first ever homebuyer webinar. The overwhelming response proved that buyers are eager to learn more about homeownership and the role down payment assistance may play in that process.

Real estate agents and loan officers should consider hosting a home buyer seminar on down payment programs, include information about them on your website or blog, or cover the topic on social media. Down Payment Resource makes it easy to showcase these programs with a variety of tools and resources created specifically for loan officers and real estate agents.

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

As we enter a new decade, owning a home may seem even more like a far-fetched goal.

Buyers face an inventory shortage, especially for entry level homes; home prices and rents continue to rise, but not wages; and the entire home buying process is still very much a mystery to many renters. Affordability and saving for a down payment remain top concerns, keeping buyers on the sidelines.

But there are positive trends developing.

At Down Payment Resource, we’re encouraged to hear from many agents who are helping new homebuyers overcome these challenges by addressing them head on. And, just in time. The next three years are expected to produce more first time homebuyers than any point since the recession, according to a recent TransUnion report. The future of the housing market is here.

Here are 4 ways we see modern agents empower new buyers:

1. Dispel outdated homeownership myths.

Agents are the primary gatekeepers and its critical they help dispel myths that may cause buyers to self-select themselves out of the market. It’s shocking that 65% of homebuyers believe they need 15% down or more, even though the average first-time homebuyer down payment is now just 6% and could be even less thanks to available homeownership programs.

Even the term “first-time homebuyer” applies to more buyers than you may think – according to HUD guidelines, a first-time homebuyer is someone who has not owned a home in 3 years. Plus, approximately 41% of programs don’t have a first-time homebuyer requirement, opening more opportunities for repeat buyers.

Orlando agent Amber Bennet said, “My peers are all first-time homebuyers and don’t have a large sum of money saved for the down payment. Other agents may not give them the attention and education they need. I was showing them that they could qualify and didn’t need 20 percent down.”

2. Leverage the experts.

Some agents avoid down payment assistance programs simply because they don’t feel like an expert in the programs available in their market. Modern agents know they can leverage their state and local housing finance agencies and participating lenders to help their buyers apply for down payment assistance and access homebuyer education. By developing new partnerships, agents don’t have to avoid first-time homebuyer business. They are raising awareness and connecting buyers to the experts — everybody wins.

Indianapolis Realtor Marilyn Parrish has connected buyers to down payment assistance for years. Using our tool, Down Payment Connect, she automated the process of matching buyers and saved time. It also helped her connect eligible buyers to participating lenders who can guide her client to the next steps.

3. Meet buyers where they are.

Today’s consumers aren’t afraid of doing their homework. Research shows buyers are doing online research early, way before engaging an agent, even though most will ultimately work with one. To meet buyers online, agents are using their websites and social platforms to provide first-time homebuyer content and guides to reach buyers early.

For example, Raoul Rowe in Austin, Texas provides fellow veterans with a simple first-time homebuyer guide on his website. The first step is evaluating their down payment assistance eligibility.

“I kept thinking, man, there’s got to be a better way. Now I teach veterans how to purchase a home with valuable Texas veteran benefits and how to navigate that process more efficiently,” Raoul said.

4. Highlight solutions.

New agents are most likely serving their millennial peers – peers who may be struggling with saving for the down payment, student debt and rising rents. They also understand buyers may be overlooking important resources like homebuyer education and down payment help.

Florida Realtor Jordan Feria said that she brings up the down payment and first-time homebuyer programs in the first meeting.

“It’s a completely different generation today. My clients are very receptive to information about down payment programs. Most want to learn more about all their home financing options,” said Jordan.

What’s next?

New buyers face real homeownership challenges, but there are more solutions available than they may know about, including down payment assistance.

If you are a homebuyer, look for professionals who can provide this type of service and guidance.

If you are a professional, look for opportunities to invest in what will move the needle for new homebuyers. You’ll be building your own future too.

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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.