What is Down Payment Assistance (DPA)?
Most loan programs require a minimum of 3-5% down payment. The amount of the Down Payment assistance will vary. There are programs that cover the entire down payment while others are a fixed amount. Some programs will forgive the amount over a certain period of time with certain criteria while others will require it to be paid back at some point either through a small additional payment or if you sell or refinance. Each DPA program will have its own set of guidelines and requirements.

Who Qualifies for Down Payment Assistance?
Another myth is that the Down Payment Assistance is for First-Time Homebuyers only but that is not the case. While there are some programs that do have that requirement, there are many that do not. There are also some programs that have income and purchase price limits while others do not. In today's market, there are many programs to help people purchase a home! What are the requirements?
Each program has different requirements to qualify as already noted. However, there are some basic rules regarding credit and income. We will discuss each in detail.

Credit Qualifications
The minimum credit score for down payment assistance is 600. Mortgage companies use FICO scores from all 3 credit bureaus, Equifax, Transunion and Experian. If you want to get a copy of your mortgage scores, you can check them at MYFICO.com. In addition to your credit score, you cannot have any reported late payments on any accounts in the last 12 months. Also, no more than 2 late payments in the last 13-24 months. Older late payments and derogatory accounts will not affect an approval. Medical collections are ignored. Bankruptcies must have been discharged more than 2 years ago. No foreclosures in the last 3 years.

Rental History
Documentation of rental payment history is sometimes required. If you are renting from a private landlord, that will require 12 months of cancelled rent checks. If it's a management company or an apartment complex, we can verify through a verification of rent form. All rental payments must have been made within the month due for the last 12 months.

Employment History
Employment history must be documented for the prior 2 years. If you were in college, that can also be used as part of the 2 year history. If you have been on your job less than 6 months, you cannot have any gap in employment more than 6 months or you will need to wait until you have been on the job for 6 months. If you are 1099 or Self Employed, that requires tax returns for the prior 2 years.

Income Calculation
Income calculation can be complex in some cases but here is a quick overview of the standard income calculation process. If you are full-time (36-40 hours a week), we will use your hourly times the number of hours. If you are salary, we will use the base salary. Overtime, bonus, tips, etc can be used if received for at least the last 12 months and we will use an average of that income. If that income has been received for 2 years, we will use an average of that income if it's been increasing over the 2 years. If it's decreasing, we can use the lowest if an acceptable explanation for the decrease is provided. Self employed income is a bit more difficult but we will need 2 years of the most recent tax returns.

Does this mean I can buy a home with no money out of pocket?
NO! Down payment assistance merely covers most, if not all of the required down payment. However, there are other costs involved when making the largest purchase of your life. There are closing costs, inspections, appraisal, earnest money, due dilligence, etc. Although seller can pay a portion of the closing costs with an accepted offer, it's wise to consult with us and your realtor to ensure you have sufficient savings for anything needed out of pocket.


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