Down Payment Assistance Pros and Cons

Down Payment Assistance (DPA) programs are designed to make new homes affordable for low to middle income buyers (some income limits are quite high now extending to $92,984 or higher).  These mortgage programs can be used whether you are a first time buyer or fifth time buyer (unless there is a state specific program that sets its own rules).

There are a variety of programs for people who are looking to buy a home.  Some of the programs require as little as 3% down from the buyer’s own pocket, but if you don’t have a 20% down payment saved up, (which I know I didn’t as a first time home buyer), then a DPA program can seem like a very good way to go.

In general, it’s good to keep in mind that many of these programs are government based.  Some stipulations may be placed on your purchase like, a requirement that the unit remains owner-occupied for a certain period of time typically called a recapture period. Some grants don’t have this stipulation so it’s important to speak to the lender and find out all information about the programs they are discussing with you. Typical guidelines to discuss are geographic limitations, credit score requirements, and maximum income requirements.

It’s always best to consult with your mortgage professional. If you do not have a mortgage broker/lender, we can assist you and always look after your best interest and help navigate the many options available to you.

Let’s take a quick glance at some of your options and the pros and cons of each.

Conventional 3%

This program only requires a minimum down payment of 3% of the purchase price. This is a great program for any home buyer that is looking for a small down payment option. The con is as a result of your lower down payment, your Private Mortgage Insurance (PMI) is higher.  Overall, great for any buyer with a small down payment and a good credit score.

Conventional 20%

This program is just like any conventional mortgage program, except you are putting 20% of the purchase price down.  You start with a good amount of equity in the property, you are not required to pay PMI and your closing costs are typically lower. The con is that a larger down payment can be hard to save up for.  Overall, this is the most popular program.

FHA Mortgage Program

The Federal Housing Administration (FHA) offers several different programs, essentially offering the home buyer lower down payments and lower interest rates in correlation with your credit score.  The FHA offers flexible terms for loan repayment with only 3.5% down, your down payment can be gifted from a family member or taken from your 401k.  The con is it carries two different types of Mortgage Insurance Premium (MIP), a percentage of your loan that get’s financed into your loan AND a monthly PMI.  Overall, this option might be best for someone has a small down payment or not perfect credit.

There are two additional loan programs available, come back to learn more detailed information on these two programs:

  • 100% Financing Options such as the USDA Rural Housing Program
  • VA Mortgage Program


The Certo Team
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Chandler, AZ 85225

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