On average, first-time homebuyers are paying a 7% down payment or about $18,627 on a house selling at a median price of $266,104, according to the Home Buying Institute. Owning a home isn’t easy, especially if you’re on a tight budget or a first-home buyer. That’s because raising enough money for a down payment can be challenging.
In most cases, down payments go up to $10,000, not to mention you’ll need extra cash for closing the deal. So, unless you take a low-down-payment loan that enables you to transfer closing costs to your mortgage, purchasing a new home can be expensive. Alternatively, you can leverage down payment assistance programs or DPAs to offset the deposit on the home’s selling price. Read on to understand how down payment assistance programs help first-time home buyers.
Makes Home Affordable
The primary advantage of down payment assistance programs is that they help first-time property buyers move from renting to homeownership. In short, DPAs help aspiring homeowners, especially those in the low and middle-income bracket, offset the down payment costs of a house. And in some cases, DPAs cover the total cost of down payment, making homes more affordable. Typically, leveraging these programs eliminates the need to have a large amount of cash upfront for paying the deposit for a house. As a result, you can own a home within a short time frame because you don’t have to spend years saving for a down payment.
DPAs Ease Mortgage Application Process
Since most mortgage loans require a down payment, chances of qualifying for financing are always slim. But with down payment assistance, you can obtain mortgage financing without facing many challenges. Note that there are several requirements for getting down payment assistance for a mortgage, including credit score, income rate, and property price. If you meet the set requirements, you can apply for down payment assistance through various programs like VA loan guarantees, FHA loan programs, Conventional 97, and 203k renovation loans.
While all these programs provide the financial assistance you need for down payment or closing a deal; most property buyers choose DPAs for FHA mortgage loans. That’s because an FHA loan program requires you to have a down payment as low as 3.5% to 10% depending on the home’s purchase price. In addition, FHA loan rates are more affordable compared to most conventional rates.
Guarantee Low-Interest Rates
Another great benefit of DPAs is that they help you qualify for low-interest rates because they provide enough cash to pay a larger down payment for your dream home. Ideally, paying a vast amount for a down payment lowers your interest rates. Also, lenders tend to lower rates on interest because they have minimal risks to take. Nonetheless, other factors affect interest rates whether you apply for DPA or not. These aspects include credit scores, loan terms, home purchase price, and loan type.
Homeownership comes with a set of challenges, and the most difficult one is saving enough funds for a down payment. Luckily, down payment assistance programs are designed to provide the needed financial assistance for a house deposit. These programs benefit first-time buyers or individuals earning low income by helping them access mortgage financing with ease.