Down payment funding alternatives

For many buyers, especially first-time buyers, saving up the funds for the down payment can be a seemingly insurmountable hurdle to home ownership. This doesn’t have to be the case. As your mortgage broker, I can help you find creative ways to come up with your down payment.

Using a gift for your down payment
One way to fund a down payment is by using a gift. For many loan programs, a gift may be used for a portion or all of the required down payment. Money given as a gift for a down payment can’t come from anyone. Family members are the usual source. And sometimes an employer may also be acceptable.   If this is an option open to you, please let me know.  I can help you determine which loan programs accept gift funds for down payments and who may give the gift.   I’ll also supply the gift letter that the person giving the gift is required to sign.  The gift letter states that the funds are a gift and will not be paid back.  There are even some loan programs that don't ask where the down payment funds come from, so no letter is required.

Down payment assistance charities

If a willing and able family member is not available, buyers  have the option of turning to a non-profit for down payment assistance. 

Some lenders allow these types of down payment assistance programs and some do not.  Some may only allow certain ones.  Here are links to a few.  In my experience, the Neamiah and the Ameridream programs are the most widely accepted, but again, it depends on the lender.

Neamiah  www.getdownpayment.com 

   Ameridream www.ameridream.org   

Grant America Program www.fhadpa.com   

                        Quickdown www.quickdown.com                        

Generally, a down payment assistance charity will give the buyer money for a down payment that does not have to be repaid.  The seller will contribute an equal sum to the charity at closing or soon after.  The seller will also pay an administration fee to the charity.  Just for your information, the Neamiah fee to the seller is $499.00 for a resale home and $385.00 for new construction.  The Ameridream is more, it is based on the sales price. 

This can be a good option for buyers who don’t have other means of securing a down payment.  However, in this market, a borrower needs decent credit or good alternative credit to be able to get approved with the lender and use this option.

State loans or Grants

There are state programs available that can help towards a down payment as well.  They are either a second loan or they are a grant that does not need to be paid back, or a combination of the two. 

In Nevada, there is the NHD (Nevada Housing Division) bond that is basically a $10,000 second that can be used towards a down payment and/or closing costs.  This can be used with conventional or FHA financing.  If it is used with conventional financing and the property is in a declining market, then it won't go to 100% financing.  If it is used with FHA financing though, it can be used for 100%.

In certain counties in California, the National Homebuyers Fund (NHD) is available.  This is a grant or a second or a combination of the two that can be used for 100% financing even in declining markets.  This program can be used with Conventional, FHA, or VA financing.

The requirement for either of the above programs is that, for the most part, the buyer must be a first time homebuyer.  The funds are available for a limited time and then have to be replenished, so they are not always available.  There are many other guidelines, such as income, assets, etc, but we can certainly see if you qualify for one of these if you are looking for help with your down payment.