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Down Payment Assistance Programs For 1st\2nd Time Home Buyers - Guide

With the signing of the Housing and Economic Recovery Act of 2008 on July 30, 2008, President Bush effectively prohibited seller –funded Down Payment Assistance for loans backed by the Federal Housing Administration (FHA). Before this bill came into effect, the seller was allowed to contribute up to six percent to the buyer to cover either the closing costs or down payment on an FHA loan. With this in mind, it is advisable to get pre-approved for a low down payment FHA home loan.

Generally, most lenders in the market require home buyers to pay at least twenty percent of a home’s selling price as down payment so as to qualify for a mortgage. Add to this the closing costs of a mortgage which can range between three and six percent of the sale price and you begin to understand why many people struggle to purchase their first home. As a matter of fact, a report from the Mortgage Insurance Companies of America, saving the money for a down payment is for many potential homebuyers the biggest obstacle to home ownership.

Fortunately, first time or even second down payment assistance programs are available in all the 50 states. Further to this, there are also several programs that are unique to law enforcement officers, teachers, nurses, military personnel etc. it is important to mention though that eligibility to most of these state and local programs usually depend on a variety of factors including but not limited to the borrowers income and the price of the home.

Some of the most popular programs in this regard are home ownership programs. These programs usually offer a variety of assistance to buyers such as down payment grants that don’t have to be paid, low interest home loans or down payment and closing cost assistance that must be repaid if you sell the home before a certain time, say five or ten years or when you sell the home. Other programs offer what are known as Mortgage Credit Certificates (MCCs) which are basically federal income tax credits which are active for the life or the loan. These come in quite handy for the low to moderate income borrowers since they can afford their housing payments.

These home ownership programs are quite local to cities or even particular neighborhoods, making them quite ideal to many prospective home buyers who can easily associate with them. However, there are also those which are run by each state’s housing finance agency with the sole mission of helping Americans own homes.

The Federal Home Loan Bank programs are quite popular in this regard. The Federal Home Loan Bank is wholly owned by a group of financial institutions. The bank does offer first time home buyers with 2 down payment assistance programs. These include the WISH (Workforce Initiative Subsidy for Home ownership) Program and the IDEA (Individual Development and Empowerment Account) program. These programs offer first time home buyers who have an income of eighty percent of less of the area or localities median income with a matching grant of three (3) dollars for every dollar contributed towards a down payment. This does imply that if a home buyer manages to save $ 4,000 for a down payment, the program will assist by proving him with $ 12,000.

Because buyers who participate in such down payment assistance programs must initially qualify for a home loan, the credit guidelines for these programs are typically the same as the lender guidelines for the specific loan program such as a FHA or conventional financing. Most of these programs also require borrowers to attend HUD approved home ownership course before they are considered for the same.

Here are some of the popular down payment assistance programs for first and second time home buyers readily available in the market. They include but are not limited to the following:

1) California Housing Finance Agency

Mailing Address: P.O. Box 4034, Sacramento, CA 95812-4034

Phone Numbers: 877-922-5432

Web URL:

Other Programs: for down payment assistance, the agency does offer two programs, the MyHome Assistance program and the Extra Credit Teacher Home Purchase Program (ECTP) which is for teachers, administrators as well as classified staff members and employees who are working in high priority schools.

2) The Council of FHLBanks

Mailing Address: 2120 L Street NW, Suite 208, Washington, DC 20037

Phone Numbers: 1-888-941-4405 or 202-955-0002

Web URL:

Other Programs: the banks Affordable Housing Program (AHP) is the largest private source of grant funds for affordable housing in the US. This is usually funded using ten percent of FHLBank’s net income each year.

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