Down payment assistance is a state-sponsored program that covers the upfront cost of your home loan, meaning you don’t have to put any of your own money down. It acts as a silent second mortgage, so you can buy a house while keeping your savings safely in the bank.
How Does Down Payment Assistance Actually Work?
Down payment assistance functions as a silent second mortgage that hangs out in the background of your loan. Because it is silent, you do not make any monthly payments on it. On top of that, it does not collect any interest. You simply pay the balance off when you eventually sell the house, or after 30 years if you stay in the home that long.
What Are the Requirements to Qualify?
To qualify for down payment assistance, you typically just need to complete a state-sponsored home buyer class. You can easily take this class online or attend in person. Believe it or not, you do not actually have to be broke to qualify for our first-time home buyer guide. For example, even if you have $50,000 sitting in the bank, you are not required to use those funds for your down payment. You can still qualify for the assistance program.
Washington and Idaho Down Payment Details
Both Washington and Idaho offer their own down payment assistance programs that pay up to 4% of your down payment. For a $300,000 house using an FHA loan, the standard requirement is 3.5% down. As a result, the state program completely covers that amount. So, you get to keep roughly $10,000 in your pocket. You can use that money to pay down debt, upgrade the house, save for a rainy day, or even take a trip to Disneyland.
What Are the Cons of Using Down Payment Assistance?
While keeping your cash is great, down payment assistance does come with a couple of drawbacks. First, your interest rate will be slightly higher. If a normal FHA loan sits at 7%, the state program might bump your rate to 7.5%. It is typically about a half percent higher. Second, the state has to review the file, which adds an extra step to the process. As a result, it can make your offer a little less competitive in a multiple-offer situation.
Have more questions about down payment assistance? Visit spokanehomeguy.com or call 509-990-SOLD (7653) — we’re happy to walk you through it and put together a game plan for getting you into a house.
FAQ
Yes, but not right away. Down payment assistance acts as a silent second mortgage, meaning you don’t make monthly payments on it and it doesn’t collect interest. You only pay it back when you sell the house, or if you stay in the home for 30 years.
Absolutely. You are not required to drain your bank account to buy a house. Even if you have $50,000 in savings that you could use for a down payment, you can still qualify for the state programs in Washington and Idaho and keep your cash.
In Washington and Idaho, the state programs will pay up to 4% of your down payment. Since a standard FHA loan only requires 3.5% down, this assistance fully covers the down payment requirement for most buyers, keeping thousands of dollars in your pocket.
Yes, it typically increases your rate slightly. If a standard loan offers a 7% interest rate, a loan using down payment assistance might be closer to 7.5%. You generally expect the rate to be about a half percent higher when you use these state-sponsored programs.
