A helping hand for home buyers
If you suffered financial setback during COVID, you are certainly not alone. However, it doesn't have to be the end of your home buying dreams.
Many buyers who need a helping hand can find it in the form of homebuyer grants, loans, and other down payment assistance (DPA) programs.
These sources of free or forgivable money can help meet closing costs and / or the down payment required to buy a home.
These programs are still raising funds across the country despite the pandemic. And some are even expanding to serve larger numbers of buyers.
For those who qualify, DPA can bridge the gap between tenants and homeowners even in these troubled times.
Review your home purchase eligibility (March 9, 2021).
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Buying a house during COVID? Down payment grants can help
Buying a house is not cheap. In addition to a down payment of 3% or more, you must pay closing costs, which are often 2% to 5% of the purchase price. Together, these upfront costs can set you back tens of thousands of dollars.
Down payment and closing costs could make home ownership seem prohibitive, especially to buyers whose income or savings were reduced during the coronavirus pandemic.
Fortunately, many home buyers can qualify for grants and other forms of down payment assistance (DPA).
What is deposit help?
Each state has special programs for first time home buyers that can help with down payments and / or the closing costs of your new home.
Most of the support for data protection authorities and closing costs is in the form of a grant or loan. These are provided by local governments, state housing commissions, nonprofit organizations, or private mortgage lenders.
While many potential buyers can afford monthly mortgage payments, "the upfront costs can make home ownership seem out of reach." Barkley, Neighborhood Lending Executive, Bank of America
With these grants and loans, eligible applicants can earn hundreds to tens of thousands of dollars.
Often times, the down payment assistance does not need to be paid back unless you refinance, move, or sell the property within about five years of receiving the money. In this case, you will pay back the money on a pro-rata schedule.
These programs can be of massive help to buyers who are creditworthy and ready to own a home but don't have the upfront funds to get into a home.
Review your home purchase eligibility (March 9, 2021).
First-time buyer programs are still doing well
During the pandemic, you will still be able to receive down payment and completion grant. Most of these programs continued to be funded in COVID-19 and are still available from real estate finance agencies and other sources in all 50 states.
Here are just a few of the places to look for DPA programs that you might qualify for.
Some programs are even expanding to help more home buyers during the coronavirus crisis.
Some grant programs will expand during the pandemic
A number of agencies and mortgage lenders have recognized the growing need for financial aid during the pandemic and have actually increased the amount of down payment assistance for home buyers.
Here are just a few examples.
As part of its Community Homeownership Commitment Initiative, Bank of America offers:
Down payment grant program – In more than 260 cities and counties across the country, qualified buyers can receive a grant of up to 3% of the purchase price of the home or $ 10,000, whichever is lower. These funds, which do not have to be repaid, can be used for the depositAmerica's Home Grant® Program – This provides a lender loan of up to $ 7,500 that can be used for one-time closing costs such as enrollment fees and property insurance. Or the funds can be used to permanently lower the interest rate on the mortgage loan. This money does not have to be paid back and can be combined with the BofA down payment grant
"Bank of America recently announced that it would triple its affordable home ownership initiative from $ 5 billion to $ 15 billion by 2025 to help 60,000 people buy their homes," he says A.J. Barkley, Neighborhood Loan Officer at Bank of America.
She explains that many prospective buyers can afford monthly mortgage payments, “but the upfront costs can make home ownership seem out of reach. That's why we've launched an affordable home ownership initiative for low- to middle-income buyers across the country.
"We also donated $ 1 billion to promote local economic opportunity, especially for people and color communities," said Barkley.
Eligible Buyers must:
Purchase in one of the 260 approved areas. Meet certain income limits. Have less than 20% deposit. Plan to have the main residence in the house
While not all will meet the criteria, those who do can raise up to $ 17,500 towards their home purchase goals by combining the two programs.
Chase Home Lending Homebuyer Grant
In addition, Chase Home Lending expanded its $ 30 billion commitment to Path Forward to help buyers, particularly in "minority communities".
Chase is now offering a $ 5,000 homebuyer grant that can be used towards down payment and closing costs when buying a home in one of 6,700 eligible neighborhoods across the country.
Eligible borrowers receive an additional $ 500 when they complete a certified homebuyer training course and opt for a Chase DreaMaker mortgage loan.
The DreaMaker Mortgage is a low down payment home loan that only requires 3% down payment and has reduced mortgage insurance premiums. It is intended to make home buying more affordable for low and middle income borrowers.
Check your eligibility for low down payment mortgages (March 9, 2021).
Entitlement to advance payment assistance
You must qualify to be eligible for a down payment and / or final financial assistance. Each utility has its own rules and criteria.
“The most common requirement for any down payment support program or grant is initial status of buyers. The vast majority of today's utility programs are usually reserved for those who have never bought a home before, ”said Than Merrill, Founder and CEO of FortuneBuilders.
Many aid programs are regional, which means that you must live in that area and meet the program requirements.
"Here in Georgia, you don't have to have owned a home in the past three years to qualify for most down payment assistance," said Donovan Reynolds, a Redfin realtor.
"Also, you have to meet the mortgage credit requirements, there is usually an income limit and you have to live in a certain geographic area."
Reynolds cites the Georgia Dream program as a popular DPA resource in his state.
Additionally, you will likely need a minimum score to qualify – often 640 or better. Household income restrictions may also apply, usually depending on the size and location of your property in your family.
Any housing professional should be able to help you find local DPA programs that you might qualify for. You can ask your real estate agent, broker, loan officer, or mortgage broker for advice.
You also need to find participating lenders for the program you want. Not all lenders are willing to work with DPA funds, although many of the best first-time lenders are happy to do so.
Is Buying a Home a Good Idea During COVID?
For many, now is a good time to buy a home.
"Persistently low interest rates are more than able to make up for a large portion of today's home prices," says Merrill.
However, mortgage rates seem to be on an uptrend, which means that buying a home may not be quite as affordable in the near future.
Additionally, the home buying process has become more flexible to accommodate pandemic-era customers.
Many buyers can safely search for homes for sale and complete the transaction without undue coronavirus risk. This can lead them to rely on virtual tours, videos and photos, and a remote or contactless deal.
"The persistently low interest rates can more than make up for a large portion of today's property prices" – Than Merrill, Founder / CEO of FortuneBuilders
However, prepare to battle with loads of like-minded shoppers. This can lead to a bidding war that drives up the price of a home you are interested in.
With stocks remaining low, expect the demand for affordable housing to outstrip supply for the foreseeable future.
"If you have the resources, including down payment or assistance with closing costs, home buying can be a great long-term investment," suggests Tomas Satas, founder and CEO of Windy City HomeBuyer.
“Just be prepared for the challenges that come with a virtual tour of a home versus a face-to-face tour. To protect your interests, insist that a professional home inspection be carried out. "
Are You Qualifying To Buy A Home Now?
Even if you secure a down payment or close an expense support fund, you still need to qualify for a mortgage loan.
Some of the most popular loan types for first time buyers are:
Conventional 97 loan – Conventional loan backed by Fannie Mae or Freddie MAc that only requires 3% less and a FICO score of 620FHA loans – Loan program supported by the Federal Housing Administration that requires a 3.5% reduction and a FICO score of 580VA loan – Department of Veterans Affairs sponsored zero-down mortgage for veterans, active service members of the military, and surviving spousesUSDA loan – Zero down mortgage for low and middle income home buyers in rural areas and some suburbs
Note that qualifying can be more difficult if you are working in a declining industry, part-time, self-employed, or lacking financial stability during COVID. For more information, see our guide to buying a home during COVID.
"You need to make sure that you have enough funds to keep the whole buying process going and that you can afford your monthly mortgage payments," warns Satas.
Follow the recommended steps to improve your chances of getting a mortgage loan:
Check your credit report for errors and work on increasing your score if possible. Contact multiple lenders who can also get the lowest interest rate and fees. Before submitting a home rental quote, get pre-approved for a mortgage loan. Avoid late rental payments that can affect your ability to qualify for a loan Avoid financing costly items before closing, which can reduce your home buying budget
"Anyone with a strong desire to buy, who can show they are able to meet financial commitments and who has saved enough money for daily living expenses and emergencies, is a good candidate for a home purchase," says Barkley.
You can check your mortgage eligibility by obtaining pre-approval from a lender. This is usually free and can be easily done online.
Check your new plan (March 9, 2021)