DPA programs (Down Payment Assistance): Should I use one? Can I qualify? And are they problematic? We’re going to answer all of those questions today.
In Georgia, there’s a popular program called Georgia Dream that helps people buy homes without needing a down payment. Basically, they lend you money for the down payment, and you pay it back later. Essentially, it’s a program where they have money set aside to lend you for the down payment, which is usually around 3% to 3.5% of the home’s price (required for buyers who are using Fannie Mae or FHA loans and are buying a home for the first time). Another company, Supreme Lending, has a similar program called the Supreme Dream. If you keep up with the payments, they might even forgive the loan. These programs change over time, but Georgia Dream has been around for a while.
These programs are different from loans like USDA or VA loans, where you don’t need a down payment but only have one mortgage. With down payment assistance, you have two mortgages - one for the house and one for the down payment. It’s for people who can’t afford the down payment upfront but still want to buy a home.
Let’s talk about some of the challenges you might face with these benefits. Even though you can borrow money for free, interest-free, there are a few things to consider.
Firstly, you have to meet multiple underwriting criteria. This means you need to qualify for the FHA or conventional loan, and then separately qualify for the down payment assistance. Also, in many cases, they’ll require you to use a specific attorney for closing, which can be a problem if it’s not the one you planned for.
Furthermore, if you have a low down payment and there are more steps involved, it might make your offer less appealing compared to others. Sellers want to know who can truly afford their house, especially if they’re taking it off the market. So, competition can be tough.
As the market changes, these factors become even more important. That’s why we’re seeing a resurgence in down payment assistance programs. So, we’ve discussed some of the pros and cons, as well as what these programs typically involve.
I’ve come across some unique neighborhood programs that offer special interest rates, but they often come with requirements like attending specific classes to qualify. While they can be challenging to navigate, those who complete them can benefit from significantly lower interest rates, sometimes even as low as 2% when the market rates are much higher.
These programs come and go depending on available government or community funding. You might have heard of initiatives like “Homes for Heroes,” which offer loans tailored for law enforcement and firefighters. Some lenders also offer similar programs where they give back a portion of their earnings to support service members.
If you’re interested in any of these programs and believe you qualify, don’t hesitate to reach out to us. We offer free consultations where we can explore your options and determine the best fit for your situation. Sometimes, even if you qualify, you might find that you prefer a different option with better interest rates or a more suitable payment structure. We’ll discuss all these factors during the consultation to ensure you make an informed decision.
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