This Week’s Spotlight: “DPA Plus 5%” with 1.5% towards Closing Costs”
Down Payment Assistance (DPA) programs are designed to help homebuyers, especially first-time buyers or those with limited funds, cover the upfront costs of purchasing a home. These programs come in various forms, such as grants, forgivable loans, and deferred-payment second mortgages.
Types of Down Payment Assistance Programs
- Grants – Free money that doesn’t need to be repaid.
- Forgivable Loans – Loans that are forgiven after a set period if the borrower meets conditions (such as staying in the home).
- Deferred-Payment Loans – No payments required until the home is sold, refinanced, or the mortgage is paid off.
- Low-Interest Loans – Second loans that must be repaid, often with below-market interest rates.
Pros & Cons of Down Payment Assistance Programs
✅ Pros:
- Reduces upfront costs for buyers by allocating 3.5% for the down payment and an Additional 1.5% towards buyers closing costs.
- Increases affordability and accessibility for first-time homebuyers.
- Some programs don’t require repayment.
- Can be combined with certain mortgage types (FHA, VA, USDA, Conventional).
- Encourages homeownership in many communities.
❌ Cons:
- Income, credit score, and home price limits may apply.
- Some programs require repayment if the home is sold or refinanced early.
- Can involve additional paperwork and longer closing times.
- Limited availability depending on location and funding.
Key Takeaways:
🔹 Eligibility Requirements: Usually based on income, credit score, and home location.
🔹 Loan Forgiveness Options: Many programs forgive the assistance after a few years.
🔹 Lower Cash to Close: Helps buyers cover down payments and closing costs.
🔹 State & Local Programs: Many states and cities offer their own DPA programs.
🔹 Can be Used with Government Loans: FHA, VA, USDA, and Conventional loans often allow DPA funds.
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