Your Guide to Down Payment Assistance

With high prices and rising mortgage rates, many buyers have turned to down payment assistance (DPA) for relief. But while DPA can reduce upfront costs and make homeownership more accessible, it’s not necessarily for everyone.

Let’s weigh the pros and cons of DPA so you can make an informed decision.

Types of Down Payment Assistance
DPA comes in a variety of forms, including:

• Grants, which require no repayment.
• Forgivable loans that require no repayment provided certain terms are met (e.g., residency restrictions).
• Deferred payment loans to put off repayment until you refinance, sell or pay off the home.
• Low-interest loans that provide funding at a reduced rate but add to overall debt and monthly expenses.
• Lender-specific programs, which provide assistance if the borrower meets certain criteria (e.g., a first-time buyer signing a 30-year fixed-rate loan).

Pros of DPA
DPA programs can reduce the financial burden of the down payment, allowing you to start the home search and purchase process earlier. DPA also reduces lender risk, making financing (and lower rates) more accessible. Plus, many DPA programs require no repayment whatsoever.

Cons of DPA
There are eligibility requirements. Most DPA programs are geared towards first-time buyers and low- to middle-income borrowers who are purchasing a primary residence. Additionally, payback requirements mean that if you don’t stay in the home for a designated number of years, you may be required to pay back the assistance in full. And, finally, DPA can delay the closing process, putting you at a disadvantage in a competitive market.

If you have questions about home financing, reach out today for expert assistance.