Pre-approval Guide (1) - Flipbook - Page 10
First Time Buyer & Down Payment Assistance
Who is considered a first time buyer?
For most loan programs, a first time buyer is defined as a person who has not had their
name on a mortgage OR deed (title) of any property in the last 3 years.
What programs are available as a first time buyer?
Many first-time buyer programs provide lower down payment options, typically ranging
from 0% to 3% of the purchase price (details on down payment assistance programs
are discussed below). Additionally, some programs feature reduced interest rates.
Who is eligible for down payment assistance?
Down payment assistance is available for eligible buyers who meet the specific
requirements of the programs offered in their purchasing area. Most of these programs
stipulate that buyers should have a credit score of 640 or higher, earn below the
income limit for their county, and be first-time homebuyers.
How do down payment assistance programs work?
Each down payment assistance program is unique and has varying terms. For many (but
not all) programs, these programs offer a grant that covers a percentage of the
purchase price. This grant is recorded as a second lien on the property and may or may
not require monthly payments. It can be forgiven after the homeowner has made
payments on the initial mortgage for ten years, with a prorated amount available after
five years. Please keep in mind that this applies to the initial mortgage term; if the
homeowner refinances or sells the property within the first ten years, they may need to
repay part or all of the grant.
Certain down payment assistance programs may come with elevated closing costs and
interest rates. When down payment assistance is provided, the buyer usually remains
responsible for any related closing costs and prepaid expenses, unless these are
covered by a seller credit. Additionally, the buyer might need to complete homebuyer
education courses as part of the process.
