Down Payment Assistance Guide

A down payment on a home is one of the biggest challenges facing new homebuyers. Fortunately, there is support available through many local housing authorities, state sponsored funding, and other federal programs that offer down payment assistance to qualified borrowers.

Who offers assistance?

Down payment programs are offered through a number of different state and local agencies as well as public and private sponsors. Common organizations that offer DPA programs include:

  • Federal Housing Administration (FHA)
  • U.S. Department of Agriculture (USDA)
  • U.S. Department of Veteran Affairs (VA)
  • State Housing Finance Agencies
  • City and Count Housing Authorities
  • Non-Profit Organizations and Employers

Who qualifies?

Many people actually! You may qualify for down payment assistance based on your occupation, location, or special household circumstances. Though many DPA programs are designed for first-time homebuyers, there are many other programs that do not have that requirement.

Who is considered a first-time homebuyer?

Many lenders consider a first-time homebuyer to be anyone who has not owned a home (primary residence) within the last three years. Some examples or other circumstances that might qualify are:

  • If you've owned a home in the past, but are renting now.
  • Single parents who were only homeowners during a marriage to a former spouse.
  • Homeowners living in a mobile home not permanently affixed to a foundation.

Types of down payment programs

Home grants

Grant programs offer help for buyers who are interested in purchasing a home but are not exclusive to just first-time homebuyers. Qualified buyers meeting the program criteria will have no obligation to pay back granted funds.

Because mortgage grants are separate from home loans, some may be combined with other programs to offer a better incentive to buy a new home. Contact American Financing to see if you qualify to combine mortgage programs.

Forgivable loans

A forgivable loan is a "soft" second mortgage that is forgiven after the homeowner has met certain criteria laid out by the lender such as a period of time the borrower must remain in the home. Once the homeowner has reached the necessary requirements laid out by the lender, the loan is forgiven and the funds do not need to be repaid.

Non-forgivable loans

These loans are generally a silent second loan that require the homebuyer to pay back the funds when they choose to refinance, transfer title, or sell the home. They can also be re-paid at a lower percentage rate. These "secondary" mortgages are often used when a borrower needs assistance with the down payment required by the initial mortgage.

Common programs

  • Chenoa is a nationwide, affordable housing program that specializes in down payment assistance solutions in conjunction with FHA loans. Through approved lenders like American Financing, the program may provide support* in the form of grants and second mortgages, up to 3.5% of the home purchase price. *Chenoa Fund availability is based on state participation.
  • If you're located in a rural area, you may benefit from a USDA mortgage grant or loan. These programs are designed to help farmers, ranchers, and homebuyers in less populated areas of the country with mortgage assistance.
  • Teachers, law enforcement officers, EMT's, and firefighters, may qualify for special mortgage assistance through HUD programs. Check HUD's website for more specific guidelines and requirements.
  • Military service members and government employees may qualify for a number of programs depending on their situation. Assistance programs are available through the PenFed Dream Maker's program as well as other VA loan programs.
  • Disabled Americans, Native Americans, and low-income households may also be able to access benefits through various mortgage programs available through state and local agencies.

Learn more

Because the requirements vary widely for each program, please contact an American Financing down payment assistance expert to help you search for available programs or help determine your eligibility.

American Financing is a nationwide mortgage lender licensed in all 50 states with access to wide range of home loan programs. Call (800) 910-4055 to speak with a mortgage consultant and we'll help you find the best mortgage for your needs.

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