Down payment help isn't just for first-time home buyers
Think down payment assistance is only for poor, first-time home buyers? It’s not.
Banks, nonprofits and government agencies all pass out money to middle-income home buyers.
"Most people self-select out of these programs because they don’t see themselves in need," says Marietta Rodriguez, deputy director of National Homeownership Programs and Lending for NeighborWorks, a national network of community development nonprofits.
Assistance programs typically target people who make between 80% and 120% of area median income. That can be a pretty high number.
In Washington, D.C., for example, a single person can earn about $90,000 and still qualify for $20,000 from Wells Fargo’s Neighborhood LIFT program. In Atlanta, a family of four could earn about $80,000 and qualify for $15,000 in LIFT funds (www.wellsfargo.com/mortgage/lift).
Not only do you not have to be poor, you don’t even have to be a first-time home buyer to use Neighborhood LIFT; you just have to sell your current home first.
Assistance can come in the form of a gift, a second mortgage or a loan (with or without interest) that’s forgiven over time.
The LIFT money is a zero-interest loan, but 20% of the loan is forgiven each year as long as you don’t move out, sell your home or refinance into a higher-rate loan.
You’ll find assistance programs offered by other sponsors, too.
"Some municipalities are still using Community Development Block Grant or Home funds (via the U.S. Department of Housing and Urban Development)," Rodriguez says. "Sometimes employers make down payment assistance pools available, there is philanthropic money, and many of our NeighborWorks nonprofits are also community development financial institutions, and that opens up a window of capital they can use."
The U.S. Department of Agriculture offers a loan program in rural areas, and the Federal Home Loan Banks offer help putting money down and paying for closing costs.
Check for the strings that often come attached, such as restrictions on where you can buy a home or a requirement that you work for a particular employer (like a public school system). Many programs force you to attend homeownership classes to learn budgeting and home maintenance skills.
Even with assistance, you’ll still have to qualify for a mortgage based on your employment history, income, debts and credit rating.
Rodriguez recommends consumers start their home search by consulting a homeownership counselor even before choosing a real estate agent or lender.
"Your Realtor and your lender have a business proposition," Rodriguez says. "That’s why they’re in business. So does a nonprofit, but they’re less about selling you a certain thing and more about facilitating a sustainable purchase that makes sense for the home buyer."
Get started with our guide on how large your down payment will need to be when purchasing a home.