Help! I have great credit and good income, but I don't have much savings!
How much down payment is actually needed in the current market? The answer is surprising. There's an old myth: you need 20% down! That is not the case anymore. You may even qualify for 0% down. We are going to explore the down payment assistance options in WA state. We're also going to go over FHA loans and how they help low to moderate income home buyers.
What are FHA loans?
You can’t talk about down payment assistance without mentioning FHA (Federal Housing Administration) loans. These loans are insured by the federal government and aimed to help low to moderate income families attain homeownership. Because these are insured, banks are willing to be more flexible with lending requirements. If you have a credit score of at least 580, you can borrow up to 96.5% of the value of a home with an FHA loan. This means the down payment could be as little as 3.5%, and with some of the other programs listed below, this could go down to 0%. With a credit score of 500-579, a down payment of 10% is needed. FHA loans do require private mortgage insurance. This is to be paid upfront (1.75% of the loan amount) and an additional monthly payment. Some of the DPA programs below would let you use the funds to pay for the upfront PMI since it would be rolled into closing costs.
The Washington State Housing Finance Commission.
The largest source of DPA is the Washington State Housing Finance Commission (WSHFC). Their DPA programs requires you to take a Homebuyer Education Seminar. This is offered for free and could be taken as a virtual class. These programs take second lien on your property. This means if you sell the home, they are the second party to get paid (after your mortgage, and before you). They have varying interest rates and you don’t have to pay back the money until you sell, refinance, or after 30 years.
Up to 4% for people that qualify for a Home Advantage Loan,
Up to $10,000 for Veterans,
Up to $15,000 for buyers with a disability or disabled family member living
Some area specific programs.
The Chenoa Fund
Another source of down payment assistance is the Chenoa Fund. The Chenoa fund is a tribally owned organization that helps creditworthy, low to moderate income individuals. This is a national program aimed to increase affordable homeownership. They have assistance for Conventional and FHA mortgages. Their conventional DPA takes second lien, is a 10-year loan, and has 2% higher interest rate than your mortgage. If you have an FHA loan the Chenoa Fund has a few options ranging from a 10-year repayable loan to a 30-year differed loan. Think twice before you try to use the Chenoa Fund for a conventional loan, as it’s not always the best option. However, the FHA options are nice.
How to take advantage of these down payment assistance programs?
Click the link below to see if you could qualify. You should also talk to a lender!! They would know for sure if you qualify, and in rare occasion some lenders offer their own version of DPA, or even require less than average down payment if you are an excellent borrower. As always, we suggest talking with a local lender, as larger national banks can be harder to work with. They tend to care more about the individual buyers as well. If you need a trusted lender or have any other questions, please feel free to contact us. We are always available!
If you have any questions or are looking for someone to guide you through the process, feel free to reach out to us. We are always available!