What is Down Payment Assistance?
Down Payment Assistance (DPA) helps reduce the monetary amount required to pay upfront when buying a home. The funds can come from a gift, grants, or low-interest loans. Many times these are funded at the federal, state, city, and county level and by charities with varying qualifications of eligibility.
Types of Down Payment Assistance
There are several different DPA programs available, each with its own terms which include:
- Grants that do not require repayment
- Loans (second mortgages) that are paid back in addition to monthly mortgage payments
- Loans (second mortgages) that are deferred and repaid when the property is sold or refinanced
- Loans (second mortgages) that are forgiven after a set number of years (varies between programs). You only repay this loan if you sell or refinance within the set number of years
Who Qualifies for Down Payment Assistance?
Depending on the type and source of assistance, and where the home is located, there will be unique sets of qualification requirements:
- Income must fall within program limits
- Borrower(s) must occupy the property as their primary residence
- The property must fall in a qualified area
- Assistance use is required in conjunction with an approved mortgage lender program
In addition, certain programs require first-time homebuyer status (although, FTHB status may be granted if three or more years have passed since ownership), homebuyer education may be required and credit score minimums apply.
Down Payment Assistance Programs In Colorado
In Colorado, homebuyers can take advantage of several DPA programs to help ease the burden of down payments and other closing costs.
- Metro Down Payment Assistance Program: With this program, borrowers who apply for a 30-year fixed-rate home loan may be eligible for a grant which offers a percentage of the mortgage amount. These funds can be used to cover the down payment and closing costs.
- CHFA Preferred Plus: This program involves a fixed-rate conventional home loan; credit score minimums are required. Eligibility is statewide with varied maximum allowable income limits.
- CHFA SmartStep Plus: This program involves a fixed-rate FHA, VA, or USDA-RD home loan and a grant or second mortgage to reduce the cost of the down payment, closing costs, and/or prepaids. For DPA loan second mortgages, payment of the second mortgage is due upon maturity of the loan.
Apply Now!
Down payment assistance programs are great resources to help homebuyers enter the market sooner and to help save money over the life of a loan. At Spire Financial, our loan professionals are ready to assist with finding the best products to meet your mortgage needs.