Down payment assistance mortgages are a type of home loan program that provides financial support to borrowers who may have difficulty affording the down payment required for a traditional mortgage. These programs aim to make homeownership more accessible by helping borrowers overcome the initial financial hurdle of a down payment.

Here are some key points to understand about down payment assistance mortgages:

  1. Purpose: The primary goal of down payment assistance programs is to assist individuals or families in purchasing a home by providing funds for the down payment. This can be especially helpful for first-time homebuyers or those with limited financial resources.
  2. Funding Sources: Down payment assistance programs can be funded by various sources, including federal, state, and local government entities, nonprofit organizations, and sometimes private lenders or employers. These programs may receive funding through grants, loans, or forgivable second mortgages.
  3. Eligibility Criteria: Eligibility requirements for down payment assistance programs vary depending on the specific program and funding source. Common factors considered include income limits, credit score, employment history, and the borrower's contribution towards the home purchase. Some programs may also have specific property location requirements or be targeted towards certain groups, such as teachers, veterans, or low-income individuals.
  4. Assistance Types: Down payment assistance can be provided in different forms. Some programs offer grants, which do not need to be repaid, while others provide loans that may be forgivable over time or require repayment. The amount of assistance can vary and is often based on a percentage of the home purchase price or a fixed dollar amount.
  5. Program Limitations: Down payment assistance programs typically have certain restrictions and limitations. For example, there may be limits on the maximum home purchase price, restrictions on the type of property that qualifies, or requirements for homebuyer education courses. Additionally, some programs may impose resale or occupancy restrictions to ensure the property remains owner-occupied for a certain period.
  6. Coordination with Mortgages: Down payment assistance programs can be used in conjunction with various types of mortgages, including conventional loans, FHA loans, VA loans, and USDA loans. However, it's important to note that each mortgage program may have its own specific requirements and guidelines for accepting down payment assistance.
  7. Repayment or Recapture: Depending on the program, down payment assistance funds may need to be repaid if certain conditions are not met. This could include selling the home within a specified period, refinancing the mortgage, or renting out the property. It's crucial to thoroughly understand the terms of the assistance and any potential repayment obligations before participating in a program.
  8. Application Process: To apply for down payment assistance, borrowers typically need to work with a participating lender or a housing agency that administers the program. The application process may involve providing documentation of income, assets, and other required information. It's advisable to start the application process early and research available programs to identify the best fit for your needs.

Down payment assistance mortgages can be an excellent option for those who are struggling to save enough money for a down payment. These programs can help make homeownership more achievable and provide individuals and families with the opportunity to purchase a home sooner than they might have otherwise. However, it's important to carefully review the terms and requirements of the specific program you are considering to ensure it aligns with your financial goals and circumstances.

Some guidelines to know;

  • Manual underwrites allowed (40/50 DTI with 2 compensating factors)
  • 2nd’s are not a CALHFA or city second grants
  • 160% of the area Median income for your area
  • Debt to income ratios up to 55% with DU approval
  • Transferred appraisals OK
  • Single family residence OK (No Multiplex’s or Manufactured)
  • First Time Home buyer education is required
  • NON-Owner Occupied co-borrowers are allowed to help with income to debt ratios
  • Gift funds allowed for down payment
  • Unpermitted additions allowed (rental income not allowed)
  • ONE FICO Score allowed