Down Payment Assistance Pros and Cons

Down Payment Assistance (DPA) programs are designed to make new homes affordable for low to middle income buyers.  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). More and more we are seeing that these programs are expanding above our middle class with income limits ranging up into the $90,000+ range on some programs.

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, 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 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 or when you decide to sell the property or you may only be able to sell it to another qualified low to moderate-income buyer. Some programs don’t have any limitations.

It’s always best to consult with one of our mortgage professionals who specialize in grants for our clients. If you do not have a mortgage broker/lender, we can assist you in finding one you can trust to look after your best interest and help navigate the many options available to you. If you have spoken to one already and would like to see if there are any other options please feel free to give us a call to answer any of your questions or find out if there are alternative grants that you may be better for you or your family.


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. Grants are available with this type of structure currently.

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 homebuyer 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, taken from your 401k, or a client can utilize a down payment assistance program.  The con is it carries a Mortgage Insurance Premium (MIP), a percentage of your loan in addition to your closing costs and your PMI will be higher.  Overall, this option might be best for someone has a small down payment, not perfect credit, or someone who is recovering from a major credit event like bankruptcy, short sale, or foreclosure recently.

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

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