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Down Payment Assistance Loans
Down Payment Assistance (DPA) loans provide funds to help pay for the down payment on a home. While it pays 100% of your down payment, closing costs aren’t covered and are still required. DPA loans can be a game changer for individuals wanting to buy a home, but are struggling to save up for a down payment.
Features of DPA:
ZERO down payment
Low mortgage insurance adjustments and no income limits
Lower FICO scores are accepted
Pros and Cons of DPA:
Pros:
Reduced Financial Barriers: DPA loans lower the amount of money needed upfront, making homeownership more accessible to individuals.
Increased Buying Power: With assistance, one may afford a better home or more desirable location than otherwise possible.
Cons:
Program Availability: Not all programs are available in every area. Research local and state programs that might be available to you and speak with a loan officer to learn more (Essex: Not available in the state of Washington or New York).
Repayment Terms: Understand the repayment terms of the DPA loan, including whether it’s a grant, deferred loan, or forgivable loan.
How Does Down Payment Assistance Work?
Here is a step by step overview of how a typical DPA loan works:
Determine eligibility: Check the criteria for a few DPA programs you’re interested in to see if you qualify
Apply for DPA loan: Work with a loan officer to guide you through the application process to ensure you meet all requirements. Once all documentation is received (income verification, tax returns, credit reports, etc) it’s time to secure your mortgage.
Secure a primary mortgage: Obtain a mortgage for the remaining balance of the home purchase price. Your lender will coordinate the DPA funds with your primary mortgage.
Close on the Home: Review and sign documents, pay closing costs, and receive DPA funds to cover the down payment.
Repay the DPA loan (only if applicable): Understand the terms of your DPA loan. Some may be forgivable, while others require repayment under specific conditions.
June Mortgage Rates
As the past few months have shown, the mortgage market has been experiencing some fluctuations, but rates have stayed around the 7% mark. According to Bankrate, on June 28th, we ended the month with an average of 7% for a 30-year fixed, 6.47% for a 15-year fixed rate, and 6.59% for a 5/1 adjustable mortgage rate.
According to Freddie Mac, we’ve seen a downward trend in 30 year fixed rate mortgages over the last few months and we can expect rates to continue trending down over the summer. Here is a graph provided by Freddie Mac showing the trend over the last year for both 15 and 30 year fixed rate mortgages (graph).
One thing to remember is individual rates will vary. Rates also depend on your credit score, loan amount and more. Make sure to stay on top of mortgage rates so you can get the best deal for your dream home!
Considerations for Homebuyers
Cost vs Stability: While the 30-year fixed-rate mortgage offers stability with predictable and lower monthly payments, shorter-term loans like the 15-year fixed-rate mortgage can save you money on interest in the long run.
Loan Type and Qualification: Different loan types cater to various borrower needs. For example, FHA loans are ideal for those with lower credit scores, while VA loans offer great benefits for military personnel. Check out our website to learn more about the loan types we offer!
Keeping an eye on current mortgage rates and understanding the different loan options can help you make informed decisions that work best for you when buying a home. If you’re considering a DPA loan, understanding how these rates impact your overall mortgage costs is crucial. For more information on leveraging current rates and DPA loans, reach out to a loan officer who will assist you in navigating the homebuying process.
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