Down Payment Assistance Plans Help Thousands Get First Home Mortgage
The difference between being able to afford monthly mortgage payments and being able to buy the house that goes with the payments is often a few thousand dollars--or less. It is the money needed for the down payment and closing costss. That difference is big enough to keep hundreds of thousands of people from home ownership. Fortunately, there is a way to erase that difference--down payment assistance programs (DAPs).
One of the biggest problems with DAPs is that many people who need them don’t even know they exist, explains Jim Stavenger of Wells Fargo Home Mortgage in Sioux Falls, South Dakota. " We have many opportunities to work with prospective home buyers who could benefit from these types of programs. We often recommend nonprofit agencies to those needing financial help with the upfront costs of buying a home," adds Stavenger, vice president and Midwest regional sales manager. " In many cases borrowers can work through these agencies to secure grants and assistance that can reduce or even eliminate the need to come up with a down payment or closing costs." One of the reasons that DAPs are becoming more important to low- and moderate-income families is because housing prices across the nation are climbing. In fact, they have risen 30 percent faster than wages and salaries for low- to moderate-income families over the last 12 years, according to a recent survey by the Milken Institute, a publicly supported economic research firm in Santa Monica, California. This has created a " homeownership affordability gap," which makes it harder for many to buy a home—especially a first home—without some sort of down payment assistance. The Nehemiah Corporation of America, the nation’s first privately funded down payment assistance provider, sponsored the Milken survey. Nehemiah is the nation’s largest DAP, and has helped more than 170,000 families since 1997 by providing more than $659 million in gift funds. The agency will provide from 1 percent to 6 percent of the total housing cost as down payment and/or closing cost assistance to qualified applicants. These grants do not have to be paid back. For more information about Nehemiah go to http://www.getdownpayment.com/, or call 1-877- NEHEMIAH. Nehemiah is not the only DAP available, however. There are a number of national DAPs, such as AmeriDream, http://www.ameridream.org/, 1-866-AMERIDREAM; and Partners in Charity, http://www.partnersincharity.org/, 1-800-705-8350. There are also state-run DAPS and even county and city agencies that help with funding. If you type " down payment assistance program" into your Internet search engine you will be surprised how many websites there are. You do have to be careful, though. While some are actual DAPs, others are lenders offering zero-down financing. You should be aware of exactly what kind of mortgage you are getting, since the two finance options are not the same. " The best way to find out what sort of assistance is available in your area is to talk to your lender or your local housing agencies," Stavenger says. If your lender says there is nothing available, keep checking, perhaps with a different lender. DAP funding comes from a number of different sources. " Nonprofit groups get grants from foundations, sometimes from public or private agencies. A number of states also have housing agencies that provide down payment assistance. You can also inquire about faith-based organizations that offer assistance." Different agencies have various programs and requirements and limits vary. If the first one you find can’t help you, keep looking. More than simple charity is involved in providing funds. Helping people become homeowners is good for the economy. People who own the homes they live in tend to spend more money on them and keep them in better condition than either renters or absentee property owners do. This adds to the general economy and also to the home’s value, which increases the owner’s equity. The Milken study looked at more than 36,000 DAP recipient families in six different areas. It says those homeowners have added $287 million to municipal and county property tax receipts over the past six years in the markets studied. " Homeownership has been a fading dream for most low- to moderate-income families, and without programs like Nehemiah these families might never be able to buy a home and receive the benefits that home ownership brings," explained Scott Syphax, president and CEO of Nehemiah. " Our program has helped bridge the affordability gap, provided badly needed public funds and helped families generate real wealth through home equity appreciation. It has provided families and communities with the economic stability they have always sought." Stavenger says that most DAPs can custom tailor their assistance programs, which are usually tied to income and purchase price or home size. " We will work within those limits to tailor our loans. The type and amount of assistance available varies from agency to agency and community to community." The main point to remember is that the help is out there. " When we meet with first-time homebuyers, we make sure they know there are sources to help. DAPs can provide all, or at least part, of their down payment and cover closing costs," says Stavenger. It’s frustrating not be able to qualify to buy a home on which you can afford to make monthly payments just because you do not have the down payment. Agencies such as Nehemiah, Partners in Charity, and AmeriDream can help. Even though some people look at down payment assistance as charity, it isn’t, really. Once you are a homeowner, your taxes could help fund similar programs at the county or state level. As a result, you can help others get the same sort of help you received to cross the chasm separating renters from homeowners.
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