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How do down payment assistance programs work?

Did you know that it may be possible to buy a home with no money down. Many people believe that you need 20% down to buy a home and that simply just isn't true. There are an abundance of programs available designed to get you into your first home with little or no down payment needed.

Down payment assistance programs provide a set amount of money to qualified homebuyers. Homebuyers can use the money to cover their down payment or closing costs. The money you receive through the program may be considered one of three things: a grant, an interest-free loan or a debt you pay off in the future.
We have multiple programs that can be combined with FHA loans (3.5%) or with Conventional loans (3%). Below I have listed a few of the most popular programs for you to start getting familiar with them.

FHA Loan

An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Authority (FHA). FHA loans are designed for low-to-moderate income borrowers who are unable to make a large down payment. As of 2017, these loans allow the borrower to borrow up to 96.5% of the value of the home; the 3.5% down payment requirement can come from a gift or a grant, which makes FHA loans one of the most popular programs available. These loans are not limited to first time home buyers.


VA Loan (Military Loan)

The key benefit of a VA mortgage is that you can obtain a mortgage and buy a home with no down payment.  This represents a huge opportunity, especially for first-time home buyers who may struggle to save enough money for a down payment.  Another benefit of the VA program is that interest rate for VA loans is typically .250% - .500% lower than the interest rate for other mortgage programs.  VA mortgage rates are lower because the government insures the loan and because VA borrowers are financially responsible and credit-worthy.

CalHFA FHA & CalHFA Conventional

The CalHFA FHA program is an FHA-insured, 30 year, fully amortized loan featuring a CalHFA fixed interest rate first mortgage. The CalHFA Conventional program is a 30 year fixed-rate first mortgage loan insured through private mortgage insurance on the conventional market. These loans can be combined with MyHome Assistance or Extra Credit Teacher Program (ECTP) and the Mortgage Credit Certificate Program (MCC).

CalPLUS with ZIP

The CalPLUS with ZIP program is a Conventional or FHA backed first mortgage loan
combined with a CalHFA Zero Interest Program (ZIP), which is a deferred-payment
junior loan of 3.0% or 4.0% of the first mortgage loan amount, for closing costs. The
interest rate on the CalPLUS is fixed throughout the 30-year term and the interest on
ZIP is 0%. This loan can be combined with MyHome Assistance or ECTP and MCC.

MyHome Assistance Program

MyHome provides a deferred-payment junior loan – up to 3.5% of the purchase
price, or appraised value, whichever is less, to be used for your down payment
and/or closing costs. (For first-time homebuyers* only).

Extra Credit Teacher Home Purchase Program (ECTP)*

The ECTP provides a deferred-payment junior loan (the greater of 3.5% of the sales price or
$7,500 - $15,000)*** for all employees currently employed in any K-12 CA public school,
including public charter shcools, school district offices and county/continuation
schools throughout CA. ECTP subordinate loans can only be used for down payment
and/or closing costs and in conjunction with CalHFA’s first mortgage programs. (For
first-time homebuyers* only).

Mortgage Credit Certificate (MCC)

An MCC enables a first-time homebuyer to take a direct dollar-for-dollar tax credit on
their federal income tax return, based on a portion of their mortgage interest paid
annually. The tax credit has the potential to save the homebuyer thousands of dollars
over the life of the mortgage loan. (For first-time homebuyers* only).

1% Down Payment Assistance program

There are a number of mortgage programs that enable borrowers to buy a home with a down payment as low as 1% of the property purchase price. Although details of these programs vary, they generally work the same way. Borrowers are required to make a 1% down payment (or less in some circumstances) and then receive a down payment assistance grant from the lender or a local housing agency to add to their down payment. For example, a borrower who wants to buy a $100,000 house contributes $1,000, or 1% of the purchase price, in personal funds toward the down payment and receives a grant for $2,000, or 2% of the purchase price, for a total down payment of 3%.

The down payment grant enables borrowers to own additional equity in the property when the mortgage closes. The total amount of down payment required from the combined contribution of the home buyer and the grant depends on program guidelines but is typically 3% of the purchase price.

Sapphire Home Buyers Grant

Thousands of people each year dream of becoming homeowners. The NHF Sapphire Program may help that dream become reality. This homebuyer assistance program currently provides low-to-moderate income families and individuals with a choice of a 3% or 5% Grant* that does not have to be repaid. The grant can be used towards down payment or closing costs. Many times this allows homebuyers to purchase a home much sooner than they thought possible.The NHF Sapphire Program is available for the purchase of an owner-occupied single-family residence, approved condominium, or planned unit development located in the state of California. The Program is available for purchases of both new and existing homes and is NOT limited to first-time homebuyers.

Who is considered a First Time Home Buyer?

Someone who has not owned and occupied their own home in the last three years.

Please remember that each program has it's on set of criteria to qualify. Give me a call or text to discuss what programs you may qualify for.

Lamont Hyde

TMG Home Loans

Your Path to Home Ownership


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