Down Payment Assistance Programs
What is Down Payment Assistance?
For buyers of homes who do not have the necessary down payment in order to purchase a home could qualify for a grant for up to 5% of the purchase of the home. These monies can be used for your down payment and closing costs.
In the state of Nevada, there are two programs that are available. First is the Home at Last Access Down Payment Assistance Grant. The other is the Home Is Possible Down Payment Assistance Grant. Both are approved through the FHA.
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Home is Possible Down Payment Assistance Grant
With the Home Is Possible program you will be receiving a 30-year, fixed rate mortgage. The grant will cover up to 5% of the purchase price of the home. This grant will be used to cover a down payment (FHA is typically 3.5% down) plus your closing costs (which can be around 1 – 2% of the purchase price). Thus, your out of pocket expense could be close to zero.
This is a grant and not a loan. By the definition of the word “grant” means it does not need to be repaid. It is “a sum of money given by a government or other organization for a particular purpose.”
Are You Eligible?
According to the FHA.com website, this is not exclusive to a first time homebuyer. And the amount of assets you have is not relevant.
Your credit score does need to be at 640 or higher for a government-backed loan, though. Your annual income must be below $98,500 for the ones borrowing the money. You do have to take a course on homebuyer’s education and pay a one-time fee of $675.
You must also meet any other qualifying requirements of the home loan.
The home you are buying must be your primary residence and not used as an investment property. The purchase price must be below $400,000, as well.
Other Potential Money
The Home is Possible program can also be combined with the Nevada Housing Division’s Mortgage Credit Certificate (MCC) Program.
Home at Last Access Down Payment Assistance Grant
The Home at Last grant is offered by the Nevada Rural Housing Authority. Much like the other grant this one also does not have to be repaid.
These loans are also 30-year fixed-rate mortgages. The grant is customizable using different types of loans offered by FHA, VA, USDA, or Fannie Mae HFA Preferred Conventional loan programs.
The borrower can receive up to $22,600 in assistance for the down payment Other limitations are as follows. For the FHA, VA or USA-RD programs you can receive between 2 – 5% of the loan amount. For the Fannie Mae HFA Preferred Conventional loan, you can receive between 3 – 5% of the loan amount.
Are You Eligible?
Much like the Home Is Possible grant the borrower needs a 640 credit score. Some loans may go up to 680 depending on what you are buying and which program is best for you. The income limit is $95,000 for the borrowers.
For the property being purchased, it can be a single family home, manufactured home, condo, townhome, and up to a 4-family building. Other restrictions may apply.
Even though you may be getting a free grant there may be some drawbacks that you may want to investigate with your mortgage lender.
When using a Down Payment Assistance program the first mortgage that you may be getting could be at a higher interest rate than if you were just to pay the down payment yourself. Have your lender run a cross-analysis on what you may be paying over the first 3 to 5 years of the loan.
You will also want to check if there are any limitations on refinancing or selling your home in the short duration. This means there could be a prepayment penalty if you sell or refinance the home in a particular period of time.
If there are short-term restrictions you must be okay with those before actually closing on the loan.
Down Payment Assistance programs are a great way to be able to realize the Amerian Dream of homeownership. They do require a credit of at least 640 and a total income under $100,000. This is a great way for someone to buy that home with the help from the federal government. Even though there might be some short-term drawbacks this may be a great way to get into your own home.