Middle-Class Homebuyer? Here’s How to Get Help With Your Down Payment

Couple with real-estate agent visiting house for sale
Photo by goodluz / Shutterstock.com

How will you buy a home if you can’t get the down payment together? It’s a problem, especially for people who have never owned a home before. But finding a down payment may be less of a problem than you think.

The crisis in housing affordability appears to be inspiring more programs aimed at helping middle-class and working-class homebuyers. Says The Homebuying Institute:

At long last, we are seeing a resurgence of down-payment assistance for first-time buyers. Much of it is happening at the state and local level, as opposed to the broader national programs we’ve seen in the past.

At least 2,400 programs around the country offer grants, tax credits and below-market interest rates, according to Down Payment Resource, a company based in Atlanta whose software links buyers, agents and lenders with resources to get buyers into homes.

Some eligible households earn as much as $100,000

Many of the programs are aimed at middle-class and working-class buyers. Depending on where you live and the size of your household, you may be able to earn $100,000 or more and still qualify for some of the programs, says NeighborWorks America, a national network of 240 community organizations.

With this wealth of help out there, it’s surprising that so few homebuyers know about it. Seventy percent of American adults did not realize that down-payment programs are available for middle-class homebuyers, according to national telephone survey commissioned by NeighborWorks America.

Hundreds of millions in aid

This assistance is not just for first-time buyers; 37 percent of these programs have no first-time homebuyer requirement, according to Down Payment Resource.

NeighborWorks estimates that its local affiliates helped 6,000 people get $100 million in such assistance in 2014. More was expected in 2015. One example: In conjunction with NeighborWorks, Wells Fargo’s Housing Foundation sponsors grants in 30 cities to help homebuyers with down payments.

Who is eligible

Some of these homeownership programs are open to anyone who meets income and geographic qualifications. Others are limited to the purchase of a home in a targeted neighborhood. Still others are aimed at particular groups of buyers.

For example:

  • U.S. military service veterans and their co-borrowers
  • Native Americans
  • Disabled borrowers
  • Borrowers working in law enforcement, firefighting, education or health care
  • Borrowers purchasing an energy-efficient home

A chart at Down Payment Resource shows programs and their funding across the country as of Sept. 30, 2015. The top 10 states (and the number of programs offered in each) are:

  • California (412)
  • Florida (230)
  • Texas (206)
  • Maryland (111)
  • New York (77)
  • Massachusetts (73)
  • Pennsylvania (71)
  • Colorado (67)
  • Georgia (63)
  • Washington (59)

Where to get help

These programs can vary a lot by location, and their qualifications can differ. Also, funding comes and goes. Because of this complexity, you’ll need two things: determination and expert assistance.

If you provide the focus, the expertise you need is out there. Here are the main sources:

1. Real estate agents

Look for agents at real estate offices in your area who have gone out of their way to become expert about the homeownership programs available. You’ll need to call individual offices, ask questions and interview agents in person to find them.

2. Lenders or mortgage brokers

As with real estate agents, some individuals at banks, credit unions and other lending institutions, as well as mortgage brokers have gone the extra mile to develop a deep grasp of lending programs that you might qualify for. Call around, ask questions and interview people until you find one you want to work with.

3. Homeownership education

The surest way to learn about down-payment assistance where you live is to get homeownership counseling or take a class. Education is a requirement for many grants and programs anyway. Plus, this work will bolster your confidence about the homebuying, budgeting and financing process.

Classes and counseling are available from a wide variety of sources, including community colleges, credit unions and lenders, community organizations and community centers serving ethnic populations. Search online for “homeownership education” and your city’s name and ask local real estate companies and lenders.

As you can see from this list of certifications for trainers, many specialized types of homeownership education exist. Start with counseling or a class in prepurchase homeownership education.

Here are a few sources for counseling and classes:

  • Framework, required of buyers for Fannie Mae’s Home Ready mortgages (learn more about these at “New Rules Put Mortgages Within Reach for More Families“) is a $75 online course, completed at your own pace. It was created by two independent, national nonprofits: the Housing Partnership Network and the Minnesota Homeownership Center.
  • HUD, the Department of Housing and Urban Development, connects homebuyers with local counselors. When you find a housing counseling agency near you, search for “prepurchase counseling” or “prepurchase homebuyer education workshops.” Or call HUD’s interactive voice system: 800-569-4287.
  • NeighborWorks America. Check NeighborWorks’ list of local organizations providing homeownership education. Find one near you.

4. Use this online tool to check options and eligibility

DownpaymentResource.com partners with multiple listing services, the companies that publish real estate listings to agents and brokers. That lets real estate agents who use Downpayment Resource software to see a special icon displayed on a property listing that may qualify for homeownership programs.

Homebuyers can use Downpayment Resource. Start by filling out an online form to see if you are eligible for programs in your area. Using the form, I found nine programs available to help a two-member household earning $80,000 a year to purchase a $200,000 single-family home in Cincinnati. You can also search for programs to help with specialized circumstances, such as veterans or disabled homebuyers.

A few more ideas

  • Ask your employer’s human resources department about down-payment assistance programs available through work.
  • If a new job (at your same salary or better) could help you get into a down-payment assistance program, give it consideration.
  • Likewise, maybe moving to another town would put you in line for a homebuyer assistance program that is not available to you now.
  • Read “Buying a First Home is Getting Harder: 8 Steps for a Successful Quest” for more ways to increase your odds of being able to buy a home.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

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