Conventional Loan Down Payment Assistance Grants with No Repayment
There are conventional loan down payment assistance grants with no repayment required. If you are looking for a grant, no minimum cash investment is required when applying for the 5% down payment assistance program.
Down Payment Assistance Programs
Conventional loan down payment assistance programs were designed to help increase the American dream of homeownership opportunities. Proceeds from the grants can go towards down payment and/or closing costs.
DPA Conventional Guidelines Summary
During the pre-approval process, a Loan Originator will run the Automated Underwriting System (AUS) to determine eligibility findings. Some basic conventional guidelines for the down payment assistance grant include:
- Minimum credit score of 620 FICO.
- There are income limits depending on the location of the property.
- No minimum down payment for a conventional mortgage required.
- 0% interest on the grant forgiven over a 3 year period.
- Lower than FHA’s mortgage insurance and cancellable.
- Manufactured housing grant is available.
Ownership of Other Residential Properties
The grant does not require you to be a first time homebuyer, but as of the note date you cannot have any ownership interest in other residential property unless:
- You have inherited the property and share ownership of the property.
- Ownership in another property, which the debt was assigned to another party by a court order.
- A consigner/guarantor on a mortgage debt with someone else and can prove that the other party makes the payments by documenting the most recent 12 months by cancelled checks or statement from the lender.
Maximum debt-to-income ratios are determined during the pre-approval process.
Getting Pre-approved for a Grant
The first step to get pre-approved for a conventional grant is to reach out to a Loan Originator so they can put together a list of documentation required for underwriting and processing.
Once enough information has been gathered, a Loan Originator will run the Automated Underwriting System (AUS) to determine your eligibility.
If the Automated Underwriting System (AUS) has Accept/Eligible finding per your scenario, a pre-approval letter will be issued to start shopping for a home.
Conventional Loan Down Payment Options
No minimum down payment for a conventional loan is required when applying for the 5% grant. Going over your options will help when determining if the grant is right for you. There are other low down payment options for conventional mortgages that can have advantages over using a grant.
2% Power Purchase Grant
When pricing out an interest rate, you can determine if the 2% power purchase grant is more competitive when saving 1% of the total down payment. This grant is similar to the 5% conventional grant, but have advantages over other grant programs. Since lenders terms are based on risk layering, exploring other competitive options can pay off.
3% Down Conventional Programs
There are three options when looking for a low minimum down payment for conventional mortgage:
- Freddie Mac’s HomeOne mortgage program that serves the needs for many first time homebuyers.
- Fannie Mae’s HomeReady, which allows borrowers to cancel their mortgage insurance once their home equity reaches 20%.
- Freddie Mac’s Home Possible allows financing with a minimum down payment of 3%, but also offers a 5% down payment option for 2-4 unit conventional properties.