Three main Types of Down Payment Assistance
Down Payment Programs- These are second and third mortgages or grants that offer 0% interest, deferred payments and forgivable loans. Purchasing in a designated area can also result additional benefits such as limited requirements, and larger amounts of funding offered.
Affordable First Mortgages- Offered by State Housing Finance Agencies to accompany their own ‘in-house’ down payment assistance programs. These first mortgages are usually below market interest rates, with reduced fees and no mortgage insurance requirements.
Mortgage Credit Certificates- This is type of first mortgage that is designed to help first time home buyers offset a portion of their mortgage interest in order to help them qualify for a home loan. It is a true credit and not a tax deduction. The maximum credit allowed varies ‘state by state’, but is capped annually by the IRS to $2,000.
USDA- also offers two types of first mortgage programs known as; ‘the Rural Direct Loan’ and ‘the Rural Guaranteed Loan.’ Both are primarily used to help low and moderate income individuals or households buy homes in rural areas. Home buyers may use funds a variety of ways listed below.
- Buy an existing home
- Repair or renovate a home
- Build a new home
- Purchase raw land & develop it for a new build
The ‘beauty’ of down payment funds, is that it can be used toward closing costs, loan down payment, and even paying down the principal loan amount which ultimately reduces your monthly mortgage payment.
Requirements to participate in down payment assistance:
- You must qualify in order to participate in the program/s
- The home of your choice must qualify for use of the funds
- You must occupy the home as your primary residence
- Homebuyer education class must be completed
- First time home buyer (If you haven’t owned a home in at least 3 years you are considered a first time home buyer)
Why you should use down payment assistance.
- You may be able to buy a home now instead of waiting
- The ability to buy a better quality or bigger home
- Down payment assistance is available in most Georgia counties
- Increase in loan interest rates means more money down to secure the loan
- The ability to ‘layer’ programs means more money toward your home purchase
- About 70% of homes qualify for down payment assistance (including new construction)
- Multi-family properties qualify for down payment assistance (4 units or less), buyer must occupy