Homebuyers

7 Down Payment Assistance Myths That May Be Costing You a Home

Do you believe you need 20% down to buy a home? Well, you may need to think again. That persistent myth is keeping countless would-be homebuyers on the sidelines long after they could have owned.

What many homebuyers don’t realize is down payment assistance (DPA) may be able to cover much, if not all, of your down payment and closing costs. This may allow you to buy a nicer home sooner than you may have anticipated.

The problem is many buyers don’t realize they could be eligible for the financial help.

“Down payment assistance programs address the two largest obstacles that prevent many people from buying a home: the down payment and closing costs,” said Matt Brown, real estate agent and broker associate at William Raveis in Naples, Fla.

Below we’ll debunk seven down payment assistance myths to give you a better understanding of your options and determine whether you may qualify. 

1. Down payment assistance is only for low-income homebuyers

This is one of the more pernicious myths preventing buyers from receiving assistance for down payments. Even if you earn six-figures, you may be eligible for down payment assistance.  

Georgia Dream, for example, offers help for Atlanta residents who earn up to $137,555, or $158,188, depending on household size. Another program, HomeFirst, is available to New Yorkers with incomes between $142,560 and $268,680.

“There are thousands of programs with very different rules and some have surprisingly high income limits,” said Daniel Amodeo, president of the real estate brokerage Amo Realty in Boston.

2. Down payment assistance is for first-time buyers

When it comes to first-time homebuyer down payment assistance, the definition of “first-time” homebuyer varies. Usually, however, you’ll be considered a first-time buyer if you haven’t owned a primary residence in the last three years. 

“Someone who owned a house in their 20s, sold it, and has rented ever since can qualify for first-time homebuyer down payment assistance in their 40s,” said Alex Rodino, a real estate agent at Keller Williams Coastal Area Partners in Savannah, Ga. 

Also, while some down payment assistance programs require you to be a first-generation homebuyer, many do not. That means you may be eligible for various programs even if you have owned a home within the last few years.

3. Down payment assistance must always be repaid

Many programs are designed as down payment assistance grants. That means they don’t need to be repaid. Some come with forgivable loans. These loans may be forgiven if you live in the home you purchased with the down payment assistance for a set period. 

It’s not uncommon for DPA programs to provide funds to help cover some, or all, of your down payment and/or closing costs without requiring repayment. That’s why it could pay off to research the programs you might be eligible for and apply.

4. Employers don’t offer down payment assistance

Some employers offer assistance for down payments as an employee benefit to improve retention and boost morale.

“[Some] hospitals and universities near Naples now offer down payment matching or forgivable loans to keep employees living close to work,” said Brown. 

Before you assume government or non-profit organizations are the only option for DPA, reach out to human resources at your company. You might be pleasantly surprised.

5. It’s hard to secure a mortgage when using down payment assistance

Forget what you’ve heard. A down payment assistance program may help you lock in a mortgage. That’s because the extra funds may help you qualify for a loan.

“Putting more money down improves the loan-to-value ratio, which reduces the lender’s risk on the loan,” said Brown.

Lenders may offer down payment assistance programs as well. And those who have worked with these programs are often able to incorporate the assistance without slowing down your closing.

6. You’re limited to a single down payment assistance program

You may be able to layer down payment assistance and use multiple programs at once. In fact, layering is a standard practice, not an exception. 

“You may be able to combine a state grant, a city closing-cost assistance program, and an employer contribution toward the down payment on a single purchase,” said Brown. 

Potential limitations often have nothing to do with how many programs you use. It comes down to which DPA options your lender allows with your mortgage.

7. Down payment assistance is only available in certain areas

Hyper-local down payment assistance programs do exist and often require you to buy a property in a particular neighborhood or revitalization zone. But there are many other programs that are not location specific.  

“Statewide programs cover any property within state lines, and profession-based programs for teachers, nurses, police officers, and firefighters extend across the entire country,” said Brown.

Geography may limit some of your options, but not all of them.