Many prospective homebuyers worry that they can’t afford a down payment, an important condition for obtaining a mortgage. Here’s what people should be aware of: depending on eligibility criteria, homebuyers may qualify for one of the DPA (down payment assistance) programs that operate through federal agencies, state, city, or county funds, or private organizations.
Read on to find out how down payment assistance works and what DPA programs are currently active in Georgia.
What Is DPA?
Most homebuyers need to put in a down payment as part of closing the purchase deal. The amount of cash required for a down payment may vary depending on the borrower’s credit history and the lender’s requirements, but typically equals about 6% of the loan value.
Understandably, having to come up with a large lump sum in cash is a major source of apprehension for many homebuyers.
DPA programs can help homebuyers cover their down payment costs if they meet certain conditions. Some DPA programs offer grants, while others involve interest-free, forgivable, or deferred payment loans.
Who Qualifies for Down Payment Assistance?
Many, though not all, DPA programs address first-time homebuyers. In most cases, “first-time” includes all people who haven’t owned real estate in the last three years.
Although each DPA program has its specific requirements, most of them target participants who can get pre-approved for a mortgage. Usually, this means a steady income and a fair credit score. In other words, DPAs are looking for reliable borrowers who just need some cash upfront to buy a home.
Down payment assistance programs usually have a cap, so a borrower may still need to advance some cash depending on the home’s value.
DPA Programs in Georgia
Here is an overview of four down payment assistance programs active in Georgia in 2021.
1. Georgia Dream Homeownership Program
The Georgia Dream Homeownership Program, run by Georgia’s Department of Community Affairs, targets particular counties, including Cobb, DeKalb, and Paulding. The program provides first mortgage loans for a 30-year fixed term, homebuyer education, and down payment assistance for qualifying homebuyers.
The Georgia Dream program addresses applicants who:
- Look to purchase property in one of the targeted areas worth up to $250,000
- Haven’t owned real estate in the past three years
- Have an income within the program-set limits depending on the number of people in the household
- Can invest at least $1,000 in cash
- Are prepared to complete a homebuyer counseling workshop
Homebuyers who meet the program’s criteria are eligible for DPA equaling up to $5,000. Some applicants, such as families with a disabled family member or educators and health care workers, may qualify for up to $7,500.
2. Cobb County Georgia Down Payment Assistance
This program, which targets Cobb County specifically, is one of the few DPA programs that aren’t limited to first-time homebuyers only. It proposes a conventional, FHA, or VA fixed-rate first mortgage for homebuyers with a low-to-moderate income and offers a non-repayable grant up to 4% of the mortgage amount to cover down payment and closing costs.
To qualify for the Cobb County Georgia Down Payment Assistance program, applicants must:
- Have adequate income
- Have a minimum FICO score of 640
- Start living in the home within 60 days of closing
Participants may simultaneously apply for additional assistance programs, but not for another first-mortgage program. Homebuyer education isn’t mandatory for all participants but is highly recommended.
3. HomePath Georgia
HomePath is a program by the Federal National Mortgage Association (also known as FNMA or Fannie Mae). HomePath properties are foreclosures and many of them are comparatively affordable.
The program provides up to 3% of the purchase amount in closing cost assistance to people who have not owned property in the past three years and who completed the program’s homeownership training course before submitting their application.
- First-time homebuyers only
- A completion certificate of the HomePath Ready Buyer course
- Working with a real estate agent to choose from property listed on Homepath.com
- Moving into the property as a primary residence no later than 60 days after closing
Low-income homebuyers may qualify for the HomeReady Mortgage if they earn no more than 80% of Area Median Income.
4. USDA Loans
Homebuyers who are interested in rural properties and who wouldn’t qualify for a traditional mortgage may apply for a loan through the USDA Rural Development Guaranteed Housing Loan Program. The program offers 0% down payment, low-interest mortgages to eligible rural homebuyers.
The USDA loan program has three variations: loan guarantees through a local lender, direct subsidized USDA-issued loans, and home improvement loans and grants.
USDA-issued home loans are usually an option for applicants who:
- Currently have poor housing conditions
- Don’t qualify for a traditional home loan
- Have an adjusted income equal to or below their area’s low-income limit
- Are interested in property outside metropolitan areas
To get loan approval, the home usually needs to be no larger than 2,000 sq. ft. and have a market value within the specific area’s loan limit. The latter depends on the applicant’s location – while some rural areas have a loan limit of $100,000, properties in expensive states like California may gain approval for loans up to $500,000.
Want to Learn More About Down Payment Assistance in Georgia?
Are you interested in learning more about down payment assistance and how a DPA program can help you purchase the home of your dreams? Reach out to us for more information.