Do You Qualify for Downpayment Assistance? What Homebuyers Need to Know

Do your individual circumstances meet the common requirements to qualify for down payment assistance? Here is what you need to know.

What is down payment assistance for homebuyers?

Down payment assistance programs provide funds to help cover the initial cash required to purchase a home, most commonly the down payment and sometimes closing costs. These programs are offered by a variety of sources, including:

• State and local housing agencies
• Lenders
• Nonprofit organizations
• Employers
• Federal programs (like those tied to Federal Housing Administration (FHA), Veterans Administration (VA) or U.S. Department of Agriculture (USDA) loans)

Assistance can come in several forms — grants, forgivable loans, deferred-payment loans or low-interest loans — depending on the program’s structure.

Eligibility varies by program, but common requirements include:

• Income limits: Many programs are geared toward low- to moderate-income buyers.
• Creditworthiness: A minimum credit score (often 620 or higher) is usually required.
• Home price limits: Some programs cap the price of the home you can purchase.
• Occupancy: You must plan to live in the home as your primary residence.

Additional criteria may include completion of a homebuyer education course or employment in certain public service roles (e.g., teachers, firefighters, military members, etc.).

Do you need to be a first-time homebuyer to qualify for down payment assistance?

Not always. While many programs are designed for first-time homebuyers, others define “first-time” to include anyone who hasn’t owned a home in the past three (or other number of) years. Other exceptions can apply as well, such as a now single parent who once owned a home with a previous spouse, so be sure to research the qualifications for the program you are interested in.

How do you apply for a down payment assistance?

The application process will vary by program, but typically involves:

1. Researching available programs through state or local housing finance agencies or your lender.
2. Applying through an approved lender who participates in the program.
3. Submitting required documentation such as income verification, tax returns and homebuyer education certificates.
4. Waiting for approval before closing on your home.

Many lenders and real estate agents are familiar with local down payment assistance programs and can guide buyers through the application process.

Can you combine down payment assistance programs with other mortgage-related programs?

Down payment assistance programs vary in their restrictions, but can often be combined with:

• FHA, VA, or USDA loans
• State-sponsored mortgage loan programs
• Mortgage Credit Certificates that provide tax credits
• Other grants or employer housing benefits

Additionally, providers often combine multiple benefits into a single program, like First National Bank’s (FNB) Homeownership Plus Program or Homeownership Plus + Community Uplift Program (currently available in select markets). Each scenario is unique, but your program(s) provider can supply more details concerning restrictions and qualifications.

Do you need to repay down payment assistance?

It depends on the type of assistance:

• Grants: Usually do not require repayment.
• Forgivable loans: May be forgiven after a certain period (e.g., five to ten years) if you stay in the home.
• Deferred-payment loans: Require repayment only when you sell, refinance or move.
• Repayable loans: Come with monthly payments, similar to a second mortgage.

It is advisable for homebuyers to read their program’s terms carefully, so they understand their specific obligations.

Can qualifying for down payment assistance impact mortgage approval?

Yes, but usually in a helpful way. Down payment assistance can make a borrower more creditworthy in the eyes of lenders by reducing the amount of upfront cash needed. However:

• Lenders will consider any loan-related assistance as part of your overall debt.
• If the assistance adds a second lien or monthly payment, it could affect your debt-to-income ratio.
• Failing to meet the program’s requirements could delay or jeopardize mortgage approval.

Discussing your individual circumstances with a mortgage professional, such as a local FNB expert, who understands down payment assistance guidelines is key to ensuring your financing stays on track.

Down payment assistance programs are valuable tools that can make homeownership more accessible. Whether you’re a first-time buyer or returning to the market, exploring available programs could save you thousands and ease the path to purchasing your new home.