DAPS, or Down payment Assistance Programs, are used to help first-time home buyers with the necessary down payment and closing costs necessary with FHA Loan Programs. There are usually two types of down payment assistance programs: 501c-3 nonprofit organization and state, county, or city-backed.
501c-3 Non-profit Down payment Assistance
The 501c-3 nonprofit down payment assistance programs usually require the cooperation of the home seller, as well as the buyer. One available nonprofit organization that assists first-time home buyers is Neighborhood Gold Down payment Assistance.
This program grants the monetary amount that is necessary for homeowners to make both the down payment and closing costs, without having to pay back that amount to the organization.
Any homebuyer that qualifies for an FHA loan, not just those that are purchasing a home for the first time, can utilize the Neighborhood Gold Down payment Assistance Program.
If you find yourself without a job due to strike, mass layoffs, or business failure/bankruptcy, The Neighborhood Gold program provides free Involuntary Unemployment Insurance. With this program, you are allotted up to $1,500 dollars each mortgage payment period for up to 12 months.
Because it is a 501c-3 nonprofit program, Neighborhood Gold Down payment Assistance offers cash grants to homebuyers at the finalization and closing of their loan. The program requires the participation of the seller so the loan must be negotiated prior to your final purchase offer.
Neighborhood Gold does require a 1% fee, not to exceed one thousand dollars, which can either be paid by the seller or deducted from the cash grant. It does not have a repayment program and a second mortgage is not required.
State, County, and City Backed Down payment Assistance
State, county, and city backed programs usually require a second mortgage to secure the loan. The second mortgage may be silent, meaning there is no initial payment required. A few of the programs also forgive the loan if you have lived in the home for 10 to 20 years. There are a few different programs that offer these types of assistance, including CHDAP, CHFA, and Access 2000 loans.
California Housing Down Payment Assistance Programs (CHDAP)
Through the use of an FHA loan and a 3% CHDAP silent second mortgage, home owners are able to purchase a home with no down payment. This type of second mortgage is never completely forgiven, but does offer deferred payments until the property is sold or refinanced.
The following contingencies are required by the California Housing Down payment Assistance Program (CHDAP):
- The household income of the borrowers must not exceed the medium income for the area
- Maximum sales prices are limited by FHA loan limits
- The property must be located in California
- The borrower cant have owned a home in the past three years
- All FHA Loan Requirements must be met
The buyer is able to purchase a home with zero down and zero costs, because of the CHDAP loan and seller’s assistance of up to 6%.
CHFA Mortgage Loans
The California Housing Finance Authority was orginally designed to provide up to 100% home financing assistance to first time home buyers. Usually, the loan is made up of a 97% FHA-CHFA fixed-rate 30-year mortgage, and a 3% CHFA down payment assistance (silent) second mortgage. The silent second mortgage is offered at simple interest for the full 30 years. The payments on the second mortgage are deferred until the FHA’s first mortgage is paid in full, or when the property is sold.
Low income families in all of the 58 counties in California, can use this CHFA 100% home loan program.
The requirements for a CHFA loan are as follows:
- Annual household income cant surpass the median family income in the county where the home is located.
- You must occupy the home for the entire term of the loan or until the property is sold
- You must be a first time home buyer who hasn’t purchased a home in the past 3 years.
- You must pay 3 to 5% down, plus the closing costs.
- You must be a legal permanent resident in the United States
The CHFA loans are subject to Governmental recapture taxes. These are income taxes that home owners are required, within 9 years, to pay when selling or transferring their CHFA financed home.
Access Loan Programs
The Access loan program, makes it possible for California and select Nevada residents to receive a loan up to 103% of the sales price, not requiring any assistance from the seller.
The program is made up of a FHA first mortgage with 3% down and a second Access mortgage that is 6% of the sales price. The loan is amortized over a period of 20 years. The 6% that the Access mortgage program covers the 3% down payment as well as the 3% FHA closing costs. This allows you to purchase a home with no money down.
Though you aren’t required to be a first time homebuyer to receive this type of loan, you must still fall within the set income limits for the county you are purchasing in.
There is also a maximum loan limit based on the FHA maximum loan limit for your county. All of the down payment assistance programs do require the use of an FHA loan.