Down Payment Assistance (DPA) programs can be a great help for homebuyers, especially first-time buyers. These programs generally come in two forms: repayable and forgiven. It is very important that before you make an offer on a property, that you know which DPA program you are going to use.
Repayable Down Payment Assistance
Structure: This type of assistance is typically provided as a second mortgage, which means it must be repaid over time. The repayment terms can vary, including the interest rate and the length of the loan.
Examples: Some programs offer zero-interest deferred payment loans, while others might have fully amortizing loans with interest rates that match or are lower than the first mortgage.
If you are going to refinance the house, sell the house or if you finish paying your mortgage you will have to pay back the amount of the DPA in full.
Forgiven Down Payment Assistance
Structure: Forgivable loans are also often structured as second mortgages, but they are effectively grants because they do not need to be repaid if certain conditions are met. These conditions usually include living in the home for a specified period, such as three to five years.
Examples: If you stay in the home for the required period, the loan is forgiven, meaning you don’t have to repay it. However, if you sell, transfer, or refinance the home before the end of this period, you may need to repay the assistance in full.
Want to know more about Down Payment Assistance? Contact The 1 Mortgage Specialist today and let one of our mortgage professionals guide you to a smart decision on the mortgage financing of your home.
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