Saving up enough money for a down payment and closing costs is typically the single biggest challenge when buying real estate, especially so for those buying their very first home. There are low down payment programs which can ask for as little as 3.5 percent down, such as the FHA program, as well as zero down loans used to buy a home including the VA and USDA programs. Still though, even with these programs it’s does take some time to gather the necessary funds needed. Yet many who are saving up to buy a home or soon plan to may not be aware that there are state programs established to help come up with funds needed for a down payment in addition to helping out with closing costs.
We have access to a program that literally gives the funds to the buyers and does not have to be paid back. There are certainly some guidelines to follow to waive the repayment requirement, primarily to own the property for at least three years and meet certain income limits. This Down Payment Assistance program is sponsored by the Golden State Finance Authority and we are an approved lender to help buyers buy and finance a home.
For example, let’s say a couple wants a conventional loan and would like some help with the down payment and closing costs. With a conventional loan and a 5.0 percent down payment, the grant can be as much as 5.0 percent of the sales price. For a $250,000 home, that adds up to $12,500 in assistance. This grant is issued in the form of a second lien with no interest and no payments and can be used to help out with the down payment, closing costs or both. With an FHA loan, the grant can be as high as 4.0 percent of the sales price. Remember, this is a grant and not a loan. A grant means it does not have to be paid back as long as the owners keep the home for the minimum period required. This is a financial gift. After three years the gift is completely forgiven.
In order to qualify for the down payment assistance gift, borrowers must be employed as a Peace Officer, Sheriff, Border Patrol, Correctional Officers and others serving in law enforcement as well as Firefighters, EMTs and Paramedics. Teachers both current and retired may also be eligible for this financial gift.
The subject property must be owner occupied and cannot be used to finance a rental or investment property. Cosigners are also okay when financing with an FHA loan and non-occupying coborrowers can also help out with a conventional loan. Standard loan limits apply for both conventional and FHA as with any other type of mortgage. Minimum credit scores are also needed and can vary based upon the amount of down payment in the transaction. For instance, with an FHA loan and using down payment assistance, the minimum qualifying score is 640.
Besides being used to finance an owner occupied property, there are also income limitations based upon the county in which the subject property is located. In San Diego county and when using a government-backed loan such as an FHA, VA and USDA loan the income limit $163,600 while in Santa Clara county the income limit is $250,400. With a conventional loan underwritten to Freddie Mac guidelines, the income limits for those same two counties are $94,070 and $143,980 respectively.
As with any program such as this there are other requirements which we can discuss over the phone. But if you’d like to know if you qualify for this special program, let’s set up a time to talk and I can walk you through the program.