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Down Payment Assistance

What are the pros and cons of down payment assistance?
Let us help break it down and see if it is something you might want to do.

down-payment-assistance

What is down payment assistance?

Down payment assistance is a program that assists home buyers with loans or grants to reduce the amount they need to save for a down payment. They vary by location and there are more than 2,000 of these programs nationwide. If the buyer receives down payment assistance, they could be qualified for thousands of dollars.

How does down payment assistance for homes work?

Down Payment Assistance helps homebuyers with receiving grants or low-interest loans, reducing the amount of money they need to put down for a down payment. In some cases if you qualify, you could possibly receive a grant or a low-interest or no-interest loan to cover your down payment. As for closing costs, some down payment assistance funds can be used for them.

Many down payment assistance programs require that you are a first time home buyer, repeat home buyer (meaning if you haven’t owned a home in 3 years), have a credit score of 620 or higher and a low to moderate income.

Types of down payment assistance programs:

  • Grants
  • Loans
  • Deferred loans

Forgivable loans Typical requirements how to get down payment assistance:

  • First-time home buyers
  • Buyers must have low- to moderate-income
  • The home will be a primary residence
  • The home is within local purchase price limits
  • The down payment assistance is used in conjunction with an approved mortgage program
  • You work with an approved mortgage lender

Minnesota Down Payment Assistance Programs

The Minnesota Housing Finance Agency (MHFA) provides two types of down payment assistance loans to eligible borrowers:
  • Monthly Payment Loan
  • Deferred Payment Loan

Pros and Cons of Down Payment Assistance Programs

✓ Pros ✗ Cons
Easier to afford a home Can add financial stress later
Help some people get financing May come with residency restrictions
May offer access to lower rates Have strict eligibility requirements
May not require repayment Slower closing process
May avoid private mortgage insurance  

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