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How Homebuyers Can Receive Down Payment Assistance

By U.S. News & World Report

Many people wait longer than necessary before purchasing a house because they think they need a large down payment. But anyone who otherwise qualifies for a mortgage can buy a home for as little as 3 percent down plus closing costs — and zero down if you’re a veteran.

“Everybody thinks it’s 20 percent, but people will be shocked to know it’s as little as 3 percent,” says Ray Rodriguez, regional mortgage sales manager at TD Bank in New York.

If you are eligible, you may even be able to purchase a home with a grant to cover your down payment and closing costs. “It depends on where you live and where you’re looking to buy,” Rodriguez says.

According to Rob Chrane, CEO of DownPaymentResource.com in Atlanta, at least 2,400 programs nationwide offer assistance to prospective homebuyers. While many are aimed at people who earn less than the median income — which varies by locality — some are open to moderate-income homebuyers, with a few programs helping those who earn up to 140 percent of the median income.

[See: The 30 Most Fun Places to Live in the U.S.]

“About 70 percent of these programs are some form of down payment or closing cost help,” Chrane says. But some assist in other aspects of homeownership. The Mortgage Credit Certificate program, for example, provides federal tax credits for interest paid on a mortgage. There also are programs that help existing homeowners with repairs.

Down Payment Resource found that the average amount of assistance provided by a program is $10,000. “Whatever the amount is, it’s not peanuts,” Chrane says. “It’s something that can concretely help people.”

The challenge is finding out what programs exist in your community and which ones you might qualify for.

The catch is you typically can’t expect your real estate agent or lender to tell you, since many of them don’t know about all the programs, either. The programs are administered by cities, counties, housing finance agencies, nonprofits, lenders and other groups. In some high-cost areas, employers may offer closing cost assistance. Programs come and go, and qualifications change periodically as well.

That makes it smart to do your research before beginning your housing search.

“There are a lot of down payment assistance programs,” says Marietta Rodriguez, vice president of national homeownership programs and lending for NeighborWorks America, a national nonprofit focused on community development and homeownership, and a U.S. News contributor. “It’s very difficult for a homebuyer to locate these and curate them.”

She recommends consulting a local HUD-approved counseling agency. “It’s their job to pull together all those resources,” she says.

Cities and counties may list some information on websites, but that information is often incomplete, making it hard to know who qualifies for assistance.

Down Payment Resource also curates assistance information, providing links to the sponsoring agencies, and is beginning to contract with multiple listing services to ensure this information is available to agents. “They’re always surprised when we show them all of the programs that are available in their marketplace,” Chrane says.

[See: The 20 Best Places People Are Moving to in the U.S.]

And don’t assume that you won’t qualify because you’re not at poverty level or have already owned a home. “[The program rules are] all over the place,” Marietta Rodriguez says. “It depends on the market, and your housing counselor knows that market.”

Chrane estimates that 60 to 65 percent of the programs are for first-time homebuyers, but most programs define a “first-time” buyer as someone who has not owned a home in the previous three years.

“There are millions of boomerang buyers out there who went through foreclosures and short sales,” Chrane says. Three years gives these potential homeowners time to rebuild their credit, and then when they’re ready to buy again they are eligible for first-time homebuyer programs.

Nearly all the programs require buyers to live in the homes as opposed to rent them out, and some will stipulate that you must pay back the aid if you don’t stay in the house for a certain number of years. Some set a maximum home price, as well as income limits for buyers. Other programs are only available in specific neighborhoods.

Down Payment Resource partnered with with the real estate information company RealtyTrac on a 2015 study that found in counties with populations of 100,000 or more, 87 percent of the residential properties would be eligible for one or more programs. “Any home within a certain price point should be eligible for something,” Chrane says.

Educators, police, firefighters, health care workers and members of the military may qualify for additional programs or greater aid amounts. “There are communities where it’s hard for them to live where they serve,” Chrane says.

Many programs require recipients to complete a homebuyer education course, which can be helpful to any first-time homebuyers. “It better prepares somebody for what they’re getting into,” Ray Rodriguez says.

Even those who don’t qualify for down payment assistance can purchase a home with as little as 3 percent down and zero for veterans.

Last year, Fannie Mae rolled out a new program, HomeReady, that is available to both first-time and repeat buyers with as little as 3 percent down, at lower cost than a Federal Housing Administration mortgage. The program allows for co-borrowers who won’t live in the house (such as parents) and takes into consideration income from people who will live in the house but not be on the mortgage. Plus, the down payment can come from seller credits or a gift. The income limit to qualify is usually the adjusted median income, but in some low-income census tracts there is no income limit.

[See: The Best Apps for House Hunting.]

Banks may also offer portfolio loans with special terms for first-time homebuyers. Not all lenders offer every program, so it’s important to shop around if you’re looking for a mortgage with a low down payment.

“I think it’s important to do your research and talk to trusted mortgage professionals,” Ray Rodriguez says. “Look at all your options before you start looking at homes.”

More from U.S. News

13 Things to Know About Selling Your Home in Fall and Winter

The 20 Best Places People Are Moving to in the U.S.

The 30 Most Fun Places to Live in the U.S.

How Homebuyers Can Receive Down Payment Assistance originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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