Do you know about Down Payment Assistance?
Do you occasionally dream of the old First Time Home Buyers Incentive of $8,000? Then learning about Colorado’s Down Payment Assistance Program will lift your mood. Surprisingly, statistics show that up to 70% of Americans don’ t know that there is such a thing as Down Payment Assistance.
Rents are currently at an all time high and for the amount that you have to pay to rent a house, you probably could buy a home. Maybe you’d even pay less, why not start exploring a home purchase?
Buying a home is not for everyone:
- If you are mobile and might have to move soon, buying a home is probably not for you.
- If you know that your life situation will change and soon you’ll need a larger – or smaller-home, then buying might not be for you.
- If you are not ready to commit to homeownership and all the responsibilities that come with it, then chances are, buying is NOT right for you.
HOWEVER, if you’ve given it consideration and determined that you are really ready to buy a home, then exploring all your financing options is the first step to fulfilling your dream. Allow the lender to assist you in determining how MUCH you can afford, then in turn you can determine how much you WANT to afford. If it doesn’t work out right now, then maybe 6 months from now will be a better time and you are ready then. You’ll never know until you take action.
Down Payment Assistance: Many Options for Colorado Buyers
By Jeff Rill-Mortgage Lender-Published June 8, 2015
With the low mortgage rates, a strengthening economy, and a relatively low cost of living, the Colorado housing market has once again come alive. And that’s exciting news for many prospective home buyers. If you’ve been on the sidelines, now might be the right time to consider buying a home. Of course there’s a lot that goes into deciding if buying a home is right for you, and the chances are qualifying for a home loan will be one of those big determining factors. Fortunately, qualifying for a home has gotten a lot easier in recent years, particularly when it comes to the down payment requirements. Today there are many low and even no down payment options available to both first time and non-first time buyers. In this post I’ve outlined some of the more popular low down payment options, as well as the down payment assistance options available in Colorado.
Know the facts.
Let’s start by separating fact from fiction. In today’s busy world of information, it’s important that you know what is current and accurate information, and what isn’t. Let’s start by debunking the 20% down requirement. Despite what you may have heard, a 20% down payment is not required to purchase a home – far from it actually. Today, through the modernization of home financing and support from government agencies like the Federal Housing Administration (FHA) and quasi government institutions like Fannie Mae, home buyers can purchase a home with as little as 3%. For example, here are three popular options among home buyers and their corresponding down payment requirement:
FHA-3.5% Down Payment
Fannie Mae-Conventional (First time buyer) -3% Down Payment
Fannie Mae-Conventional- (Non-First Time buyer)-5% Down Payment
Need Lower Down Payment Options?
Even with these low down payment options, many buyers may still need a lower down payment option – that’s where down payment assistance comes in. Fortunately Colorado residents have a variety of down payment assistance options to choose from. These programs provide the buyer with funds at closing to be used toward the purchase of their home and fulfill the down payment requirement. These funds are usually offered as a grant (meaning: No Repayment Required!) and are available to both first time and non-first time home buyers.
More About Down Payment Assistance: Let’s talk a little more about the down payment assistance available in Colorado. Here are some of the most common questions I get surrounding Down Payment Assistance.
- How Does it Work? Down payment assistance is offered by local housing authorities, non-profits, and state and federal sponsored housing initiatives. These funds are made available in an effort to promote home ownership in the state. Some of the more popular providers of down payment assistance in our state are the Colorado Housing Assistance Corporation (CHAC), Colorado Housing and Finance Authority (CHFA), and the National Home Buyers Fund (NHBF). These providers work with local mortgage lenders in the state to make these funds available to home buyers.
- How Much Can I Get? The amount of down payment assistance available to a prospective buyer will vary based on program and sales price of the home. Generally, buyers using these programs can expect the amount of down payment assistance to cover most, if not all, of the minimum down payment requirement (3-3.5%). Some programs do require the buyer to contribute a minimum of $1,000 into the purchase of the home.
- Who Qualifies for Down Payment Assistance? With a variety of programs to choose from, you might be surprised how easy it is to get down payment assistance to purchase a home in Colorado. Each program has different qualifying requirements but they are all “needs-based” – meaning they have purchase price limits and/or income caps. With that said, I found these caps and limitations to be very generous, allowing many prospective buyers the opportunity to take advantage of these programs.
- How Do I Apply for Down Payment Assistance? Applying for down payment assistance is also quite easy. The providers of down payment assistance rely on local mortgage lenders to help qualify and facilitate the funding of these programs. Each lender wishing to offer these programs to their clients must first get approved with the specific down payment assistance provider and then usually complete a training course to ensure its staff fully understands the programs. Once approved, the lender can offer these programs to buyers. As a result, a prospective buyer would just need to check with his/her lender at the time of prequalification to find out which programs are available for their particular situation.
So, whether you have 20% or just $1,000 to put down on your next home, there’s likely an option to fit your needs. There’s obviously a lot more to qualifying for a home loan than just the down payment, but I hope this gives you at least a better understanding on this sometimes seemingly challenging aspect of purchasing a home.
About the Author: Jeff Rill is a local mortgage lender in Colorado Springs. He has over 12 years of experience in the Industry and has been actively involved in the Colorado Springs lending community since he moved to Colorado in 2005. Over the years Jeff has become highly experienced with First Time Home Buyers and the down payment assistance programs available within the state. As a result, Jeff has become a respected authority on the topic.