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Aiming to purchase a house but finding the down payment daunting? Fortunately, there exist various programs that provide down payment assistance, potentially offering a lifeline for your dream of homeownership.
Down payment assistance programs, or DPAs, extend financial aid to qualified homebuyers, usually in the form of cash grants or low-cost to interest-free loans. These initiatives typically originate from government-funded entities at the local and state levels, although similar schemes are offered by banks and credit unions.
Here, CNBC Select offers an in-depth exploration of the variety of down payment assistance available, providing insight into how you might qualify.
Exploring the Different Kinds of Down Payment Assistance Across the nation, there are thousands of down payment schemes, many of which are designed specifically for first-time homebuyers. DPAs generally fall into two main categories – grants and loans. Each category has specific qualifying criteria and repayment structures.
Grants Grants are often the most attractive option for potential homeowners, as they essentially provide free money towards a down payment. For instance, the FirstHome program in Iowa extends a grant of $2,500 to aid with down payment and closing costs. Meanwhile, the First Home Loan Program from MaineHousing offers up to $5,000 to those who meet the program’s stipulations.
Banks also provide similar grants. Bank of America, for example, offers a Down Payment Grant program where qualified borrowers in specific areas can receive a grant of up to 3% of the home’s purchase price, capped at $10,000, for use as a down payment.
Chase Bank has its own scheme, the Chase Select Grant, available in eligible areas. Recipients can gain $2,500 or $5,000 which is initially applied to reduce the interest rate, with the remaining funds used towards fees or the down payment.
Loans Unlike grants, loans must be repaid. However, DPA loans often come with more favorable terms than conventional loans. Some loans are forgivable, meaning if you stay in the home for a certain period (typically five to ten years), the loan turns into a grant and doesn’t have to be repaid. These terms can provide a considerable boost to those struggling with initial homeownership costs.
Furthermore, both national and local banks offer loans as part of their down payment assistance programs. For instance, Wells Fargo’s NeighborhoodLIFT program provides eligible homeowners with an interest-free loan of up to $20,000, which is forgivable over five years.
It’s worth noting that while these programs can be immensely helpful, they often have stipulations such as income limits or requirements to complete homebuyer education courses. Therefore, potential homebuyers should research thoroughly to understand the specifics of each program and determine if they meet the qualifications.
By understanding these assistance options, potential homebuyers can alleviate some of the financial stress associated with the down payment, making the path to homeownership more accessible.