Down Payments & Down Payment Assistance

Without a doubt, the hardest part about deciding to buy your first home is the financing! More specifically, coming up with the down-payment and earnest money.

In this article, I am going to give you a brief synopsis of home loan financing and earnest money. I will also go over ways that you can help yourself by utilizing government programs, loans and grants.

And if you want to know if you can qualify for down payment assistance, click the button below!

What is a down payment?

It’s a pretty easy concept really, a down payment is money that you put out of your pocket, on top of a loan you receive, to purchase something. When I talk about it, it will almost always be for a home loan.

How much will my down-payment be?

There is no one answer to this question, different circumstances require a different amount.

When you are buying a home, the down payment is calculated as a percentage of the price of the home. In the case of an FHA loan, the down payment amount will be 3.5%. A conventional loan will require anywhere from 3% to 20%, depending on what the loan is for.

Usually in the case of a first time home buyer, FHA is the way to go. That’s because of the grants and programs that are available with this type of loan.

Unless you are applying for a VA, or USDA loan, which do not require a down payment, but have some very specific requirements.

For a USDA loan, there are requirements for income, credit score and, location of the home.

For VA, you must be a veteran, and there is a maximum amount you can borrow.

Want to find out if you can qualify for down payment assistance? Click the button below! 

Why do we have Down payments?

So why do we have down-payments? It doesn’t make any sense, right? The bank is paying for the other 97% of the value, why not the whole thing?

Well, they tried that. But it was found that people were really quick to let a loan fall behind on payments if they had no stake in it. And the people that had put their own money in, more often stayed on top of their payments.

It was particularly noticeable in the years from 2000 – 2007 when banks started allowing leniency in down payments. And we all know what happened then. Not to say that it was the cause, but definitely a contributing factor.

How can I get help with a down payment?

The government realizes that the price of a down payment is unrealistic to some. With the way that the price of homes has gone up in the last 20 years, you are looking at the average down payment going from $4,900 to $14,000. That’s ridiculous!

There are a lot of programs out there that can help you to get past the financial hurdles and into a home.

But for most of us, CHFA is the way to go.

From CHFA’s Website,

created in 1973

CHFA’s mission is to strengthen Colorado by investing in affordable housing and community development.

We were created in 1973 by the Colorado General Assembly to address the shortage of affordable housing in the state. In 1982, when the Colorado economy was experiencing economic difficulties,

C​HFA began making loans to businesses.​​​​

In essence, they are a government organization that helps people get into homes. But it’s more than that, they offer all kinds of assistance to businesses, renters and homeowners.

They offer down payment assistance grants that will take care of 100% of your down payment. But keep in mind, you will have a higher interest rate because of it. Like I mentioned earlier, banks require a down payment because it makes someone more likely to repay a loan. If you don’t put any money up, you will just have to pay more interest.

There are also requirements on who can get down payment assistance.

  • First you will need to qualify for an FHA loan, a credit score of 580 and a reasonable debt to income ratio.
  • Secondly, there are income limitations – If you make too much, you don’t qualify.
    • However, there are “CHFA Targeted Locations” That have a higher income limitation.

Keep in mind though, CHFA does not originate loans. Instead, they work with lenders to fund grants and loans to those who need them.

So in order to work with them, you will need to find a CHFA approved lender.

For more information about CHFA and the programs that they provide, visit their website  https://www.chfainfo.com/

Do I have other options?

CHFA isn’t the only down payment assistance program out there. In fact, there are tons! But it’s a matter of finding the right one for you. That is something your lender will have to do. I wanted to go over CHFA because it’s the most widely known and accepted.

But the truth is there are a lot of options for a lot of scenarios. But there aren’t options for people who just decide to not save their money.

The purpose of a down payment is to show that you have the financial maturity to save money. If you make enough, but choose not to save, you are going to have a hard time finding assistane

Want to find out if you can qualify for down payment assistance? Click the button below!

Back to first time home buyer’s guide!

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