Down payment assistance (DPA) programs are designed primarily for first-time home buyers who may need a little extra help buying a house. They are essentially second mortgages—separate from the primary mortgage loan—to cover part of the down payment required.
What is Down Payment Assistance?
Depending on the type of loan you qualify for (VA, FHA or conventional), you will be required to pay anywhere from 3-20% of the home’s value as your down payment. Not everybody has this kind of money put away, but are otherwise good mortgage borrowing candidates. Down payment assistances programs can allow for up to 100% financing on FHA loans which require 3.5% down.
It’s important to understand that each down payment assistance program is a little different. They can vary from state to state and from lender to lender. The exact requirements will depend on where you live and what programs are available to you specifically based on your income and other financial indicators.
What Are are the Qualifications for Down Payment Assistance?
Though the requirements may vary, there are some general guidelines that most of down payment assistance programs will follow:
- First-Time Home Buyers—These programs are generally restricted to first-time home buyers. They aren’t designed to help you move up, buy a second home or purchase an investment property.
- Income Restrictions—Buyers will typically need to have a low-to-moderate income to qualify for down payment assistance.
- Primary Residence—As stated above, the down payment assistance loan must be applied toward the purchase of a home that’s used as a primary residence (no investment properties or second homes).
- “Targeted” Census Tract—Not all houses will qualify for DPA. They typically must be in “targeted” areas, which have been identified by the government (through the census) as lower-income communities relative to statewide median income levels. Programs vary by zip code, so you are likely to get more money and qualify easier in one of these targeted areas.
- Approved Mortgage Program—The down payment assistance loan must be used in conjunction with an approved mortgage program.
- Approved Lender—You must work with a DPA-approved lender to receive the benefits of a down payment assistance loan.
Click here to view a state-by-state breakdown of DPA programs.
California Down Payment Assistance Programs
Here in California, first-time home buyers may be eligible for the California Housing Finance Agency (CalHFA) MyHome Assistance Program. It provides down payment assistance for mortgage borrowers who are eligible. It is a second mortgage that can cover up to 3.5% of the home’s purchase price or $10,000 (whichever is less).
CalHFA defines a first-time home buyer as “someone who has not owned and occupied their own home in the last three years.” You may qualify if you owned a home in the past, as long as it wasn’t in the last three years.
Income limits for the CalHFA MyHome Assistance Program will vary by county. In San Diego County, the household income limit is $188,000. As a high-income area, the limits here are very generous. This makes this DPA program available to many qualified borrowers who need assistance with their down payment.
Click here to see the full list of county-by-county income limits for the CalHFA MyHome Assistance Program.
To learn more about different mortgage loans and what first-time buyer and DPA programs you might qualify for in San Diego County, contact Transparent Mortgage today at (858) 761-7795.