Many States, Cities and Counties offer Down Payment Assistance Loan programsto first time homebuyers whose income is low-to-moderate. Each program participant establishes the criteria for their local area. Usually, these loans are for homebuyers earning up to 80% of the HUD median income for their County and family size. Many of these loans bear zero interest, are "silent seconds", meaning they require no monthly payments, with the entire balance due when the home is transferred, sold, refinanced, or the primary mortgage is defaulted on.

These PAL programs are for first time homebuyers- those who have never owned a home, or have not owned a home for the previous three years - who meet the income criteria set for their local program, and will have less than $2,000-5,000 in liquid reserves after closing. Some programs require matching funds from the homebuyer.

The potential first time homebuyer has to:

1. Decide if the PAL meets their needs
2. Select a participating lender
3. Call the lender and find out if they qualify for the PAL
4. Begin shopping for a new home
5. Participating Lender submits PAL application and documentation

The primary first mortgage may be an FHA, VA, Conventional Fixed Rate Mortgage, and may allow a Bond program.

These Purchase Assistance Loans are not subsidized loans, and therefore contain no recapture provisions. They do require that the home be owner-occupied for the life of the loan, and are usually for single-family residences, which may be a house, condo, townhome, or manufactured home on permanent foundation meeting State criteria (not in parks).

Guidelines and criteria may vary widely, so check with the Housing Authority for the area you are considering buying your home in.

The State of Oregon and the City of Medford both offer a Purchase Assistance Loan program, and both programs may be used in conjunction with the Oregon Bond Loan. With many first time homebuyers finding their biggest hurdle to fulfilling their American dream of homeownership is the lack of a down payment. As with the Mortgage Credit Certificate, check with your local Housing Finance Agency for details on local programs available near you.

 ***2008 Update - The State redirected the funds for this program to help flood victims. Stay tuned, as this program will hopefully have funding again by early 2009.

See you at the closing table!

Karen Cooper - OR/CA Mortgage Consultant - www.Quality4Loans.com