You'd like to buy a house. You cleaned up your bad credit, for the most part, you have a good job, and you could make a monthly house payment. But how are you supposed to save up a down payment when you're paying rent? Good question. The ability to save a down payment and reserves, or an emergency fund, is seen by lenders as desirable, because it demonstrates that you have some discipline and some financial sense. But for those on the financial fringes, that's expecting a lot -- cars break down, hours get cut, kids need doctors, it's always something. And government and charitable agencies are aware of that.

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Seller DPA Is Gone for Good

The problem with Nehemiah and AmeriDream assistance is that the source of down payment funds isn't a charitable organization--it's the builders and sellers of the homes involved. And when the seller is paying you to buy the home, it distorts the home's value. A study found that homes purchased under seller DPA programs sold for, no surprise, 2-3% more then comparable houses not in the program. Which made the houses a lot more likely to end up in foreclosure.

However, that doesn't mean DPA is a thing of the past. Today's DPA can take several forms, but it usually involves a no- or low-interest loan you don't have to repay until you sell the property. Or it may be a grant that you don't have to repay at all, or some combination of the two.

HUD Allows DPA

You might have to be a first-time buyer, have low-to-moderate income, or both to be eligible. In many cases, "first-time buyer" just means that you can't have owned a home in the last three years. Check each program for details; they're all different. Many state and local governments have programs. Note, the programs can run through funding fairly quickly. Apply early and often.

Look at Idaho's program, for example. It dispenses up to $20,000 to qualifying first-time buyers through its Idaho Housing and Finance Association. You have to meet income limitations and take a home buying class. Prince Georges County in Maryland offers low income buyers up to $60,000 in assistance to buy foreclosed homes. And the city of Peoria, Illinois provides up to 20% of the purchase price of the property, up to $10,000. You have to be a first-time home buyer unless you buy in certain areas.

How Do You Find Mortgage Down Payment Assistance Programs?

  • Ask the lenders. Ask the loan agents about the types of down payment assistance programs they work with. Many loan officers don't do them or don't know much about them, so be sure and get help from someone who does.
  • Check with HUD. Go to HUD's State Information Web page, choose your state, then select "Learn About Homeownership."
  • Call charitable organizations. There are many organizations providing down payment assistance. If you plan on using FHA financing, get its roster of approved organizations by checking with the home ownership center nearest you (Atlanta, Denver, Philadelphia, or Santa Ana).

Down payment assistance is still out there, and the demand is greater than ever. Grab it before the money runs out.