DPA (Down Payment Assistance)
Who qualifies for down payment assistance?
Down payment assistance programs are typically meant for first-time home buyers. However, a repeat homebuyer often counts as a “first-time buyer” if they haven’t owned a home in the past three years. Other requirements might include income caps and buying a home in a qualified area.
Every down payment assistance program is a little different. The exact requirements to qualify will depend on where you live and what programs are available.
That said, many of them have similar guidelines, including:
Restricted to first-time homebuyers
Buyers often must have low- to moderate-income
The buyer is using the home as their primary residence
The home is in a “targeted” census tract
The DPA is used in conjunction with an approved mortgage program
You work with an approved mortgage lender for the loan program
Programs vary by zip code, but you’re likely to get more money and qualify more easily if you’re buying in a so-called “target area.”
What mortgages can be used with down payment assistance?
Almost all DPA programs require you to borrow from an approved lender, participating in an approved mortgage program. You may have to sign up for a particular mortgage product.
However, DPA-approved mortgages often include the most popular loan programs, like:
FHA loans (backed by the Federal Housing Administration
VA loans (backed by the Department of Veterans Affairs)
USDA loans (backed by the U.S. Department of Agriculture)
Many also let you borrow conventional loans (ones not guaranteed by the government), including those backed by Fannie Mae and Freddie Mac.
In other words, the mortgage products in your DPA program may be very flexible. DPA programs are something of a zip code lottery. Depending on where you want to buy, you could be in line for nothing. Or a few thousand dollars in the form of a second mortgage, or many thousands in the form of a grant, which you never have to repay.
Why so many different programs and different rules?
All sorts of sources fund DPAs. Money might come from federal, state, city, county, and charitable funds. And each of those is free to set its own eligibility criteria and rules.
You’re likely to get more money and qualify more easily if you’re buying in a so-called target area.
The federal version of these is also called a “Qualified Census Tract” (QCT). Those tracts are designated by the U.S. Department of Housing and Urban Development, based on household income data for the area.
Your state or other local authority may also designate target areas. They’re usually places that have experienced chronic and unusually bad economic problems and are in need of regeneration.
California Down Payment Assistance Programs
The California Housing Finance Agency (CalHFA) MyHome Assistance Program provides down payment help for eligible buyers. This takes the form of a second mortgage of up to 3.5 percent of the home’s purchase price, or $10,000 — whichever is less.
This is a first-time homebuyer down payment assistance program. So it won’t help if you’re selling an existing home. However, CalHFA defines first-time homebuyer as “someone who has not owned and occupied their own home in the last three years.” So many who’ve previously owned homes may qualify.
Check out the MyHome Assistance Program webpage for more information. You’ll find some income limits there. If you’re a teacher or fire department employee, certain program limits may not apply. And take a look at HUD’s list of alternative programs for California. Some DPA programs explicitly say that you can use their funds for your closing costs as well as your down payment. Others may or may not have rules about that. Check your local down payment assistance programs to see if closing cost grants are included.