Are you wondering if it’s possible to buy a home with little or no money for a down payment?
If so, you’ve come to the right place! Whether or not you’re a first-time home buyer, there are several programs (government and private) that may work for you.
What is a down payment for a home?
For the majority of buyers, financing is needed to purchase a home. A lender follows certain loan guidelines and one of the main factors involves how much money will be required by a borrower to pay upfront in a large purchase transaction, like buying a home.
In the past, the traditional down payment amount was 20% of the purchase price of the home. The good news is that in today’s market, you can purchase for as little as 3 or 3.5%. Even better news, there are programs that will help cover the entire down payment amount, making it possible to own your house with little or no money out of pocket.
Who qualifies for down payment assistance?
First-time home buyers are normally the target segment for down payment assistance programs. While that is still true, there are several programs that will provide down payment assistance funds for any buyer, not just first-time buyers.
One important point we should make here. Most lenders consider someone who hasn’t owned a home for 3 years or more to be a first-time buyer. It’s very possible that someone could be considered a first-time home buyer multiple times in their life depending on when they previously owned homes.
If you’re not a first-time home buyer, you still have several options for down payment assistance. There is usually a program available for repeat buyers as long as they don’t currently own a home. If you have further questions on program eligibility, please reach us directly at 801-871-8101.
What are the Utah down payment assistance programs?
The down payment assistance programs vary and can change at any time without notice. Here’s the current list of popular options we help with:
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- Utah Home Grants. Many cities and counties provide home grants to attract new owners to their area. These home grants are typically for lower or middle-income families. Most home grants do not have a monthly or yearly pay back requirement but usually have a time period where if you sell the home, you may have to repay a portion or all of the grant back.Each city or county who offers grants has different requirements or restrictions. Some places will require you to place a property under contract prior to applying for a grant, while other grant providers do not. Some cities will require a buyer to provide some personal funds at the time of the home purchase, these amounts can vary. Lastly, some properties may not meet the required guidelines for a grant provider. If a property has issues with the foundation, roof, plumbing, electrical, or HVAC (heating & cooling systems), it may not be approved for grant funds.
- Forgivable Down Payment Loan (Chenoa Fund). These forgivable loans for down payment amounts can be provided by a private banking institution. The biggest provider of forgivable down payment funding is a banking institution called Chenoa.Chenoa has several program options, and the forgivable down payment loan is widely used. To use these funds, Chenoa must also provide financing for the entire purchase of the home. The downside to using funds from Chenoa is they typically have higher interest rates. While not the most affordable for a monthly payment, the Chenoa program can be a big help for a buyer who is struggling to cover a down payment but can afford a higher monthly payment.
- Repayable Down Payment Loan (Utah Housing). These loans are the most popular. The best repayable down payment assistance loan is provided by the state of Utah and the program is called Utah Housing. These loans can help cover down payment and closing costs.Utah Housing has raised its income limits making them much more available to the general public than grants or forgivable down payment loans. As long as you make less than $125,000 annually, a program may be available to you. Additionally, these programs are not geographically bound, so you can use them almost anywhere in the state of Utah.There are 4 program options within Utah Housing. These include FirstHome, Home Again, Score, and HFA Advantage. Each program has different credit score requirements. Typically, a 660 credit score (mid score from the 3 credit bureaus) will be sufficient. FirstHome, Home Again, and Score programs are FHA-based loans (fixed rate, 30-year government-backed loans) while HFA Advantage is a conventional loan (also a fixed rate 30-year loan). One of the features of using HFA Advantage is you will be eligible to purchase condos and townhomes in communities where the other programs are restricted.
- Federal No Money Down Program (USDA). If you are looking to purchase a property in a rural community, the federal government provides a no-money-down financing option. This program is known as USDA Rural Housing.Please be aware that this program does not qualify for any locations in Salt Lake, Davis, or Weber counties.
However, there are several places nearby that will qualify. The nearest locations along the Wasatch Front include Tooele County (Stansbury Park, Tooele, Grantsville, Erda) and Utah County (Saratoga Springs, Eagle Mountain, Payson, Santaquin). This program is widely used in many parts of Utah from Cache County to Washington County.
Other Important Factors for Down Payment Assistance
We want to provide as much information as possible to help prepare you for qualifying for down payment assistance. Here are some further details that you should know about.
Credit Scores
There is a wide range of programs and grants we explore for our clients, but credit scores are very important factors for what someone will be eligible for. Generally, credit scores above 660 will be enough to qualify for most programs, and there are some options that will allow scores as low as 620.
We have developed a very effective game plan for those who need to boost their credit scores. If you don’t have the best credit, don’t give up, and please don’t be embarrassed! We have helped people with low credit scores build a plan that turned everything around and ultimately put them in their very own house. If you need to improve or to quickly boost your scores to qualify for a down payment assistance program, please give us a call at (801) 871-8101 and get started today.
Debt Analysis
How much debt you have acquired is also an important factor to qualify for a down payment assistance program or home grant. Each program has different requirements on how much debt will be allowed based on your income (debt to income ratio). If you have high credit card bills or a large car payment or a stack of student loans, you may have a difficult time getting approved for a down payment assistance program or home grant.If you have too much debt to qualify for a program, let us take a look at your situation and help you. We have guided many clients and structured creative solutions that meet program guidelines to allow someone to purchase a home.