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Own A Home In 2022 With Down Payment Assistance

Carla Ayers6-minute read

November 17, 2022

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There are a number of factors to consider when purchasing a home, with one of the most important being the size of your down payment. Financial experts recommend having a rainy-day emergency fund and a savings. Once those accounts have sufficient money in them, we can then start saving for a down payment. For a lot of us, that’s easier said than done. With the cost of living growing more than the average wage increase, saving for a down payment has become progressively more difficult for the average American.   

If one of your goals is to be a homeowner in 2022, we have great news. Rocket Mortgage® accepts down payment assistance in the form of grants and second lien down payment assistance to help you get the keys to your new home.

What Is Down Payment Assistance?

When you buy a home, you’ll likely need to put money down that is equal to a percentage of your home’s final purchase price. This is called your down payment. The amount of the down payment depends on the type of loan you will use to purchase the home and the home’s sale price.

Depending on the down payment assistance (DPA) program you qualify for, you could receive a grant or a low- to no-interest loan to cover your closing costs. This is helpful for those who may not have cash on hand but can afford a mortgage.

What Does Down Payment Assistance Cover?

Each DPA provider will have their own guidelines outlining how their down payment assistance funds can be used, so be sure to reference your application or speak with the program’s administrator for clarity. Many DPA programs allow funds to be used for the down payment and closing costs of a home purchase.

A down payment is the sum of money a home buyer pays upfront in a real estate transaction. Down payment requirements vary but are typically 3% – 20% of the final purchase price of the home.

Closing costs are the fees you pay to your lender and other third parties for administering and processing the mortgage loan.

Below are examples of common closing costs:

  • Government fees and taxes to transfer and record the property sale
  • Appraisal fee
  • Title company fees and title insurance
  • Real estate commissions
  • Attorney fees

Types Of Down Payment Assistance

Most down payment assistance programs are offered in the form of a grant or a loan.

Grants: True grants do not require repayment. It’s important to note, there are programs with “grant” in the title, but they have some repayment requirements attached.

Second lien: Terms of the second lien will vary by program. Some programs may require immediate or deferred payments. There are also programs where the lien may be forgiven after a set period of time.

Regardless of what the program is called, make sure you understand the terms of the agreement and what the repayment requirements are.

Most down payment assistance programs are offered locally by state, county, or city government. Nonprofit organizations and tribal entities have down payment programs as well. Many DPA programs require that you be a first-time home buyer. But don’t fret if you’ve owned a home in the past, first-time home buyers are often defined as someone who hasn’t purchased a home in 3 years or more. If you own a rental or investment property, you likely won’t qualify for down payment assistance.

You will need to qualify for both the mortgage home loan and the DPA program to receive down payment assistance.

How Does Down Payment Assistance Work?

Most programs will require an application so they can determine an applicant’s eligibility for the program. The applicant’s household income, credit history and credit score will likely be considered. In addition to an application, some programs may require the applicant to attend training or workshops to learn about the mortgage process and maintaining personal finances while owning a home.

Many of these programs are reserved for first-time home buyers only, and how much assistance you can receive is dependent on the program. Some DPA programs offer a percentage based on the home’s sale price, while others cap their down payment and closing cost assistance at a certain dollar amount.

When searching for down payment assistance programs to apply for, be sure to ask these three questions:

  1. Do I qualify for the program?
  2. How much assistance can I receive?
  3. Is the assistance fully forgiven or am I required to pay it back? If so, when and what are the terms?

Once approved for down payment assistance, you choose a participating lender.

Some down payment assistance programs have established relationships with lenders, so be sure you ask the DPA provider for lenders that participate in their specific program. Lenders will have their own requirements and restrictions when it comes to using down payment assistance programs as well.

If you’re planning to use down payment assistance to purchase a home, it’s a good idea to speak with your preferred lender and the down payment assistance provider to ensure they can work together to get you to the closing table.

You will need to apply and qualify for both the DPA funds and a home loan. Rocket Mortgage® accepts down payment assistance from third-party providers.

How To Find Down Payment Assistance Programs

There are over 2,000 down payment assistance programs nationwide. Each program will have their own unique terms and requirements. Rocket Mortgage offers a variety of mortgage products that you can use with down payment assistance. Like the DPA program, these first lien mortgage products also have individual eligibility requirements you’ll need to meet.

Make sure you talk to your loan officer to ensure the down payment assistance program you’re interested in or applying for is accepted by Rocket Mortgage so that we can find the right product for you!

Not sure where to start? Give us a call and we’ll help you identify local programs in your area.

Down Payment Assistance FAQs

Below are some common questions that come up when discussing down payment assistance.

How long does it take to get down payment assistance?

How long it takes depends on the program and the type of assistance. Each state offers its own programs, as do different cities and organizations. These programs move at different speeds depending on the demand and size of the program.

The assistance program must work with your lender to secure the loan and the down payment funds. This can add time onto the closing process, depending on how quickly the down payment assistance program acts.

What do I need to qualify?

The two most common requirements you need to meet are a minimum credit score of 620 or higher, and income that meets the program’s requirements.

Some common program requirements:

  • The home must be in a specific locale or county.
  • You must be a first-time home buyer.
  • You must attend a class on home buying and finances.
  • You must live in the home for a certain amount of time (often 3 – 10 years).

How can I apply?

Start by researching if programs are available in your area. Check with your city and county to see if they offer any loans or grant programs. Search their websites for information on how to apply. Reach out to them via email or phone for specific answers you can’t find online. Make sure your mortgage lender works with the program. 

Can I get additional down payment assistance with an FHA loan?

While FHA does not offer its own down payment assistance, you may still be able to get help with your down payment through a program. Assistance for closing costs on FHA loans is capped at 6%. For an FHA loan, you must use some of your own money, but most down payment programs will work with FHA loans.

The Bottom Line: Don’t Think You Have Enough For A Down Payment? Think Again

Buying a home doesn’t have to be a dream, it can be your reality. With the cost of living on the rise it’s often hard to save for a rainy day and a down payment. Thankfully today’s home buyers have more options to help with some of the upfront costs. Down payment and closing costs assistance from a third-party provider can help you cover your down payment and other out of pocket loan expenses.

Many people who thought owning a home would be a long-term goal are finding it can happen now! If you’re ready to make a move, call (833) 326-6018 to speak with a Rocket Mortgage Home Loan Expert to discuss mortgage and DPA options today.

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Carla Ayers

Carla is a Realtor® with a background in commercial and residential property management, leasing  and arts management. She has a Bachelors in Arts Marketing and Masters in Integrated Marketing & Communications from Eastern Michigan University.