With all these first-time home buyer programs, homeownership finally feels like something you can achieve. Many have secured their dream home using the down payment assistance programs. And many other buyers plan to do the same. However, homebuyers often don’t have all the information they should have about the down payment programs. Without knowing the complete details, buyers make mistakes that cost them and drag their home-buying journey.
So, what key details should you know about down payment programs before applying for one? We will tell you below!
Key Facts to Know About Down Payment Assistance Programs
1. These Programs Are Not Only for First-Time Homebuyers
Down payment assistance programs are strictly for first-time homebuyers, right? Well, that’s not always the case. If you have owned a home in the past, you might still qualify for down payment assistance. Many programs have a flexible definition for first-time buyers.
A program may consider you a first-time buyer if you sold your previous home years ago. Another exception? Some programs consider you a first-time buyer if you have recently gone through a separation or divorce. So, don’t rule yourself out of these programs just because you have owned a home. Many programs could consider you a first-time home buyer.
2. There Are More Options Than Just Government Programs
Homebuyers typically begin their search for down payment assistance with government programs. They think that government programs are their only option. However, they fail to realise that private organisations and non-profits also offer down payment assistance. For instance, some real estate platforms offer cashback that can go toward your down payment. The Tonsto down payment assistance program is one such option that offers up to $50,000 to first-time home buyers. Many mortgage lenders also offer special grants or incentives to qualified buyers.
Exploring these alternatives can open up more opportunities for you. This strategy can help you, especially if you fail to qualify for the government programs.
4. You Might Need to Repay the Assistance
Another key thing many read wrong about down payment assistance is that it is always free money. However, this is not so. Depending on the type of assistance you receive, you may need to repay the amount. Some programs require you to pay back the assistance in monthly instalments. You may need to repay it with or without interest. Under some programs, the repayment may be bound to the future value of your home. You must pay a percentage of your home’s appreciation to the organisation that provided the down payment assistance.
Hence, understand the repayment terms of the down payment assistance program before committing. You don’t want to be caught off guard by a large repayment amount later on.
5. Forgivable Loans Might Have Conditions Before They Are Written Off
In case you don’t know, a forgivable loan is down payment assistance you don’t have to repay. Sounds amazing, right? Yes - but forgivable loans have a catch. Forgivable loans require you to stay in the home for a set period. If you sell the home or move out before the term ends, you may need to pay back part or even all of the loan.
6. Application Windows for Some Programs are Limited
Some down payment assistance programs only accept assistance during specific periods. For instance, municipal or provincial grant programs may open applications once a year. Also, they often have limited funds. So, the down payment assistance gets allocated on a first-come, first-served basis.
Even programs available year-round may close temporarily if their funding runs out. So, always check application deadlines and mark your calendar. If you are serious about getting assistance, be ready to apply as soon as the window opens.
7. Income Limits Vary Depending on the Program
One key thing you need to check before applying for a down payment program is the income limit. The income limits vary depending on the down payment assistance program. One program might limit eligibility to an annual household income of $100,000. Another one in an expensive city might set the limit at $150,00 per year.
8. You May Need to Complete a Homebuyer Education Course
Some down payment assistance programs require applicants to complete a homebuyer education course. Basically, these courses help you understand mortgages, budgeting, and other homeownership responsibilities. Some courses are available online, while others may require in-person attendance. Either way, prepare to set aside a few hours to complete this step.
8. Not All Lenders Will Accept Down Payment Assistance
Even if you qualify for a down payment assistance program, not every lender will accept it. Lenders usually hesitate to accept this due to extra paperwork or repayment conditions. Some may also have concerns about how the assistance impacts your loan-to-value ratio. That's why check with your lender before applying for assistance.
If your preferred lender doesn’t accept down payment assistance, shop around. Mortgage brokers can be particularly helpful in this situation. They usually have access to multiple lenders. They can help match you with one open to working with down payment assistance programs.
9. You Can Stack Some Down Payment Assistance Programs
Here’s a little-known secret: You can stack some down payment assistance programs. Yes, you can combine programs to maximise your benefits. For instance, the down payment assistance program Tonsto allows you to use funds from the FHSA, RRSP, or TFSA. The stacking option can be a great way to lower your upfront costs even further.
All Set to Make Your Homeownership Dream a Reality?
Now that you have learned the basics of down payment assistance, you can confidently take advantage of it to secure your new home. Start by exploring all the available down payment assistance programs in your area. Once you find a program that fits your situation, scan their website and read through all the details. Check the income limits, repayment terms, and any extra conditions before you apply. Understanding these details early on will help you avoid surprises and expensive mistakes.
So, go ahead, start your search, and take the next step towards owning your new home.
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