Down Payment Assistance

[Jacob Willett]

I am in the process of exploring financing options for my first deal and I came across the idea of government down payment assistance grants.

From what I read, these grants can be used to cover the down payment on a low money down loan such as FHA loan, which I was planning to utilize anyway since I will be an owner-occupant.

Has anyone used this in the past? What were your experiences with this program?

[David Kelly]

As a lender, I am happy to chime in.  There may be many options available to a first time homebuyer depending on the area that you are in.  Usually there are state/city grants available.  Most of the time it is qualified by income, typically you need to make 80% or less of the area median income of where  you currently live.  This number fluctuated depending on who and how many people will be living in the home.  Some grants are deferred payments, or will be an additional amount added on to your mortgage.  Most need to be repaid back, but there are better ones out there that do not need to be paid back as long as you live in the home for a certain period of time.

There is a nationwide grant available that we use called the WISH grant.  It is about the best one out there in my eyes.  Its a 4 to 1 match on your down payment and you can get up to $22,000 free (you bring $5500 to closing).  It is not added to your payment, its a second mortgage that is forgiven after 5 years of living in the home.  This may not be the best for an investor, since you may not want to live in it that long but they do prorate it.  So if you move out in 3 years, then you would only have to pay off the portion of that money for the remaining 2 years.  It CAN be used towards down payment and closing costs.  

I think I may do a post about this program to explain it better.