New Down Payment Grant is a Game Changer
Down Payment Grant
There is an experimental new conventional loan program available that offers a down payment grant for home buyers with good credit.
This could be a game changer.
With this down payment grant, there are no liens, no higher rates, no extra costs, and you are left with only having to come in with 1% of the purchase price for your down payment.
Eligible buyers have limited closing costs, and discounted mortgage insurance rates.
This special down payment grant is available in all 50 states, but is very limited in terms of lenders that are approved offer the program.
Freddie Mac Home Possible
The down payment grant is based on using a Freddie Mac Home Possible first mortgage.
Home Possible 97% Features
- Maximum loan to value 97%. Minimum 3% down payment for purchase.
- 1-unit single family unit homes, condominiums, and planned unit developments are eligible.
- Flexible sources of down payment. Down payment can come from a variety of sources, including friends and family, employer-assistance programs and secondary financing.
- 30 year fixed rate mortgages provide stable mortgage payments.
- Income flexibility. Borrowers with income above the area median income (AMI) may be eligible in high-cost areas. No income limits in underserved areas.
- Private mortgage insurance is discounted, and can be cancelled once you pay principal balance down to below 80% loan to value (FHA mortgage insurance cannot be cancelled at any time).
- All borrowers must live in the property. Non-occupying borrowers not allowed at 97% loan to value.
In addition to meeting the income and eligibility guidelines for the Freddie Mac Home Possible program, there are a couple of additional qualifying criteria that must be met to qualify for this down payment grant.
- The maximum loan limit is $424,100
- The maximum debt to income ratio is 43%
- The minimum credit score is 700
How the Down Payment Grant Works
If your credit scores are above 700, and your loan will be under $417,100, you are only required to bring 1% of the purchase price to the transaction.
If you are buying a $400,000 home, your down payment requirement is only $4,000!
Here’s the most amazing part of this, the down payment grant of 2% of the purchase price gets you into the home with 3% equity.
The down payment grant is a gift from the lender, and the loan is underwritten as though you have a 3% down payment.
Paying for Closing Costs
One of the biggest challenges with other down payment grants or assistance programs is that if the assistance does not cover 100%.
There are many more options for paying for closing costs than what is allowed for down payment.
Since the down payment grant is an allowable grant from the lender, you have all of the creative closing cost solutions available to you as though you were coming up with the down payment yourself.
There are 3 common ways to pay for closing costs.
- Use your own money – if you have money left over after paying 1% down payment
- Ask for a seller credit – this is common, but may be a disadvantage in competitive situations
- Adjust the interest rate to generate a lender credit to cover closing costs.
Unlike most available assistance programs that require you to use a specific first mortgage program with a pre-determined interest rate, the down payment grant offers you the full flexibility of a traditional conventional loan.
Speed and Simplicity
The greatest features of the down payment grant is that this is a standard, traditional conventional loan program.
With the added flexibility that the Freddie Mac Home Possible loan offers, this grant program will not create the extra paperwork, approval processes and added processing time that is so common with City, County and State assistance programs.
Need Help Finding a Lender?
The down payment grant program is not widely available, even though it is available in all 50 States. If you need help finding a lender that is approved to offer this program, click the banner below and we’ll match you with someone that can help.