Thursday, February 03, 2022

Getting Down Payment Assistance to Buy a Home [2022]

 


[2022] Homeownership is within your reach! Now is the best time to learn about adding down payment assistance (DPA) for qualified borrowers who have good ratios and decent credit but lack funds to purchase a home. There are more DPA programs available now for FHA, conventional, USDA and VA loan products than ever before. The best reason to know about these programs is that DPA funds can cover your down payment and usually a good amount of the closing costs that sellers aren’t willing to pay in today's heated housing market. This makes buyers with DPA more competitive than buyers who need closing costs covered.

 

But DPA programs don’t come without challenges. Often, a DPA issue can arise during the processing of a loan and if the 2nd mortgage for DPA funds cannot be approved, the only remedy to complete the deal may be a gift at the last minute.

 

Some of what you should be aware of...

 

  1. In comparing FHA 96.5%LTV and conventional 97%LTV loan programs with DPA added, we found that when a borrower’s credit score is over 700, the combined conventional mortgage payment is usually lower than the combined FHA payment due to lower private mortgage insurance (PMI). The closing costs compared were just slightly higher for the conventional loan.

  2. Borrowers who need DPA to help with home purchase costs need to have funds in the bank. For borrowers who have lower credit scores and are tight or slightly over on the front FHA ratio, one to two months of reserves may be needed to get the loan approved through automated underwriting required for many programs. This is because the higher combined loan to value (CLTV) of the first and 2nd DPA mortgage poses a greater risk. 

  3. Be careful ...  Some programs income criteria call for area median income (AMI) that clients need to qualify for with each DPA. Some programs require that only the income of the borrower applying for the loan should be analyzed, while other programs require household income for all members of the family to be used.

  4. Know your geographic area ... some DPA programs can provide funds for on a home purchase only within a certain area. Community Reinvestment Act (CRA) DPA funds are available for home purchases within a mapped area.  Make you you check this out.

  5. There may be program differences for different property types, such as a manufactured home versus a single-family residence (SFR). 

  6. On any DPA program, always ask your lender UPFRONT if there are any overlays or unique underwriting criteria for the specific program.

  7. Know that sometimes the 2nd mortgage payment will need to be included in qualifying debt ratios.

  8. The BEST TOOLS to have in your toolbox when looking for DPA:
    1. For a fee, check out Down Payment Connect to see if you are eligible for DPA! Within Down Payment Connect, you get an incredibly detailed program overview of over 2000 county, city and state DPA programs and many proprietary programs across the U.S.

 

As you can see there are a lot of details to put in order to better utilize DPA programs for your home purchase.  If we can assist you, please contact us at aundreabeach.com or call us at 702-326-7866.

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