Down payment assistance programs are often associated with myths. Read on to know the reality.
The down payment is the initial payment that you need to make when you buy a house on credit. Irrespective of the kind of mortgage program you choose, you need to make a down payment. And the larger the down payment, the better it would be for you – it would help you to get a lower mortgage rate and might ensure approval even when your credit score is low. But how to come with the down payment amount if your income is low? Well, not to worry, down payment assistance programs are there to help you.
Designed to make the process of buying a home more affordable, these programs have helped countless buyers to fulfill their dream of having a home. But the myths often prevent people from opting for down payment assistance to purchase homes in Texas. To make sure, you don’t fall prey to the myths, here, we have put together a few myths and the reality.
Myth 1: Down payment assistance programs make home financing more difficult
Your home purchase is likely the largest purchase that you will ever make. So, you want to get it right and make a wise financial decision – isn’t it? When you apply for and use a down payment program, it does need additional paperwork, but the paperwork is similar to what you are already doing when applying for a home loan. Lenders who offer these programs are qualified to write the loans associated with the programs and understand how to add this special financing into the home loan without complicating the real estate transaction. This is why it is important to seek information about available programs before getting pre-qualified. Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.
Myth2: These programs are only for low-cost homes
No, it is not true. These programs are not just for narrowly defined homebuyers and “targeted” neighborhoods of very inexpensive homes. Generally, homes in any neighborhood may be eligible with sales price limits ranging from $200,000 to over $700,000 in high-cost markets. Besides, some homebuyers can have income limits of up to 120 percent of the area’s median income and higher that can amount to over six-figure incomes in countless markets across the country. Additionally, some may offer tiered assistance dollars at various income levels, so higher income isn’t an automatic disqualifier. Income limits based on the household size, so limits for a family of five are significantly higher than for a single person.
Myth3: The assistance is only compatible with FHA loans
While FHA loans are generally used with down payment assistance, it does not mean that other loan products are off the table. Nowadays, you can find flexible down payment requirements with FHA and conventional financing. Various down payment assistance programs are compatible with VA, FHA, USDA, and conventional loans. But how do you know what will be the best fit for you? It comes down to purchase price and assistance amount. But if you have $10,000 in assistance on the same $150,000 house, which brings you to more than 6% down and may help reduce your total monthly payment, loan fees, and mortgage insurance. Keep in mind that there are various factors to consider. So, ask your lender for various loan options, compare them and then make a wise decision.
Myth4: These programs guarantee longer closing timelines
Some of these programs may indeed a little longer than a typical loan to underwrite, approve, reserve funds, as well as deliver closing documents. But the closing timeline must be measured from the date the full down payment assistance application is submitted, not when the opportunity is first discovered. That’s where the misconception lies. So, research these programs early. By completing homebuyer education courses and other things, you are getting a jump start on your loan. You just need to trade a little extra legwork to gain immediate equity and retain some of your savings. Ask your lender to keep you informed during the procedures so that you meet your timeline expectations.
So, without waiting any more, opt for the right down payment assistance programs and buy your dream home.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.