Although the common perception is that you need to have a 20% down payment to purchase a home, that’s simply not the case. Most programs require as little as around 3% to get into a home. Some home buyers, especially first timers, don’t even have that.
Luckily, there are government assisted programs that allow you to purchase a home with 0% down payment! For example, the most commonly used down payment assistance program in Washington State is the Washington State Housing Finance Commission’s Home Advantage program.
The WSHFC has offered opportunities to countless families who otherwise would be stuck renting without their assistance. Below is a list of things you should know about down payment assistance loans.
#1 You will have to take a class to get approved for the loan.
In order to be approved for the down payment assistance by WSHFC, you will be required to take a class from a certified instructor. The classes can be done live or on the internet. The schedule for the live classes are HERE.
The classes are usually taught by a lender and a Realtor. They are to be 5 hours in length. Some instructors choose to teach the full five hours in one day or evening while others break them up into two different sessions.
The online classes may be more convenient as you can do them at your own pace. However, unlike the live classes there is a $50 charge for taking the class online.
#2 Your rate will be a bit higher
The rates for down payment assistance loans are typically higher than the “regular” loans you might otherwise use to purchase a home. Because the rates are controlled by the organization that is offering the down payment assistance, your lender will have no control over them.
The WSHFC offers two different rate options. The first is a lower rate with a 1% origination fee and the second is a little bit higher without the 1% fee. This is similar to all loans. You will either pay upfront or over the life of your loan for the interest rate you get for your mortgage.
#3 You will have to pay the assistance back
The WSHFC is not a grant. It is a second loan with a zero interest rate and zero payment. However, upon payoff you will be required to pay it back in one lump sum. This means that when you refinance, sell or the final payment as been made, you will be required to pay the amount of the second loan back.
It is important that you and your loan officer discuss your short term and long term goals for the purchase of a home.
#4 They take longer to close
The WSHFC loans take a little longer to get to the closing table. This is primarily due to the necessity to get approval from the WSHFC after the loan has been through lender approval.
Your lender will have no control over the turn times issued by the WSHFC. Typical turn times are about 5-7 business days. These turn times vary based on the volume of people that are using the down payment assistance program.
#5 There are different qualifications for them
There are several things that may make qualifying for a down payment assistance loan a little more challenging.
- The minimum credit score is 620. While you may be able to qualify for another loan program with a lower credit score. The WSHFC will not approve a loan with a score below 620.
- There are income limits. These income limits are based on the county that you live in. For Spokane County the limit is $96,500 for a household. This includes all of the people that are in the home and on the loan.
- The property you are purchasing must be a primary residence. Down payment assistance loans are not allowed on second homes or investment properties.