How much is needed for a down payment?
3 types of down payment assistance to boost your purchasing power
Are your savings holding you back from buying a home? While pulling together a large enough down payment to reach 20% of your purchase price eliminates pesky mortgage insurance, 68% of homebuyers are making down payments of less than 20%.1
If you’re like most buyers, down payment assistance (DPA) could help you hit 20% sooner, and as of July 2019 there are about 2,500 DPA programs nationwide.2 These chiefly consist of grants, second mortgage loans and MCCs (a type of tax credit).
1. Grants
Though the benefits vary across the state, many state housing authorities offer down payment grants, which can be used towards a variety of home purchase expenses including down payment, closing costs or sometimes even renovations and repairs.
2. Down Payment Assistance Programs (DPAs)
Down payment assistance programs often come in the form of a second mortgage with low or no interest rates. These loans are offered by city and state government and can often be deferred—and in some programs completely forgiven over time.
3. MCCs
An MCC, or Mortgage Credit Certificate can be issued by state or local government and allows a taxpayer to claim a tax credit for some portion of the mortgage interest paid during a given tax year. An MCC is not a tax deduction, but instead is able to provide a dollar-for-dollar tax credit to recipients to help increase housing payment affordability.3
No matter your location or financial situation, DPA programs are worth a look. With thousands of programs across the country to choose from, the right DPA could give you a boost and help you close on your dream home!
[1] HousingWire
[3] FDIC
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact Guaranteed Rate for current rates and for more information.
Guaranteed Rate does not provide tax advice. Please direct all tax questions to your tax adviser.