Using a DPA may also help you to hang on to more of the money you saved for the downpayment to use toward mortgage payments. It’s a smart idea to pay more than the minimum due each month. It helps you save money over the term of the mortgage.
But what do you need to know about downpayment assistance, also known as DPA?
- Not all who qualify for an FHA mortgage ALSO qualify for downpayment assistance.
- Some don’t qualify because they earn more than the income cap for that state program.
- Many of these programs are need-based, and income restrictions may apply.
- And it might not just be the income of the applicant.
- Some states look at total household income as opposed to just the applicant’s income.
First-Time Buyer Status May Be Required
Don’t be fooled by the term “first-time homebuyer.” That term in this specific context (DPAs) has more than one meaning.
“First-time homebuyer” for DPA purposes often means you have not owned a home in three years. and not always “someone who has never owned a home before.”
Minimum Credit Scores
Some downpayment assistance may require a minimum credit score. Start monitoring and working on your credit earlier than you might expect when saving for a mortgage for best results. You’ll be glad you did, not just because it helped you buy a home.
Purchase Price Limits
Some but not all downpayment assistance programs may have a maximum sale price. There is no standardized dollar amount in such cases, so you’ll need to contact the program in your area to learn what, if any, limits may apply.
Occupancy Rules
Some DPA may feature more than one guideline for occupancy. What does this mean?
You may be required to occupy the home for a minimum amount of years without selling or moving. Those who don’t or cannot abide by such regulations may be required to repay some or all of the DPA. Every program has its own unique rules. There is no national standard in this area.
