These days it seems to be harder than ever to get started on the property ladder. There has been a recent worldwide recession and the lending market has been severely affected. With so little disposable income available to the average person it is easy to understand why people can’t save enough for a down payment. Down payment help for first time home buyers is available, but you have to know where to look for it.
The Government has had many schemes come and go over the years and calls have been made to bring back the Neighborhood Gold scheme. Thanks to President Obama, we now have an Economic Stimulus Bill which is aimed at combating the economy’s slump. If you haven’t owned a home for three years or if you have never bought a property then you can get hugely beneficial tax breaks.
You can get around $8000 in tax credits for your new home but if that is more than 10% of the value of your home you just get the 10%. This only applies if your earnings are within the limits set at $75k for a single person and double that if you are a married couple. If you earn over $75k then you can still benefit from these breaks but at a slightly reduced level. The tax break is only cut off for people earning over $95k and over.
The Government has gone further to help its citizens and the housing market. The US Department for Housing and Urban Development (HUD) is able to provide you with a list of ways in which you may get help if you meet certain requirements. The different types of help are;
- Government Entity Down Payment Assistance Program (DAP)
- Nonprofit and Nonprofit Instrumentality of Government Down Payment Assistance Programs
- Gift Programs
Government Entity DAPs are sometimes provided as a lien to coincide with Federal Housing Administration loans for the property you wish to purchase. HUD does not keep lists of government entities that can help you in the way they maintain the nonprofit DAP list mentioned. With that in mind, these are probably the most widely available.
Nonprofit and Nonprofit Instrumentality of Government DAPs are Down Payment Assistance Programs that are provided on a nonprofit basis. Help is given in the form of a lien against the property you purchase. If you can get this in your area then you will be effectively getting an interest free loan against the value of your new property. The department for Housing and Urban Development maintains a list of nonprofit organizations that can help you.
Gift Programs are increasingly rare and only exist to help those most in need. They may be an accepted way of getting money for a down payment with an FHA mortgage but they are generally frowned upon in the mainstream prime and subprime market. It’s up to the mortgage provider to be responsible for making sure the FHA requirements are met when using this process. These gifts can be arranged without prior FHA approval for a loan. The problem is that, due to recent changes in the law these donations have been extremely difficult to obtain in many cases.
These three programs exist to help people that can’t afford to save for a down payment themselves. Using assistance programs for down payment help for first time home buyers will sometimes mean you have a low credit score. With a low credit score you will not get the best mortgage deal and could even be forced to use the subprime providers. Your first action when considering a mortgage should be to improve your credit worthiness.