What are DPAs?
How do they work?
Who is eligible for a DPA?
Why use a DPA?
These are a few of the questions asked about the down payment assistance (DPA) programs that I get on a regular basis.
- What is a DPA? A down payment assistance program is one where a homebuyer can receive a gift amount between one percent and six percent of the final contract purchase price of a home. In addition, the seller of a home donates and equal amount to a non profit origination. There is also a processing fee for the transaction. A few months ago, there were a large number of DPA originations. Now, there are only a few. Those of note for me are: AmeriDream, Nehemiah and QuickDown.com. These gift funds are offered to qualified homebuyers, requiring no repayment, no second mortgage and no recapture penalities.
- How do they work? Mortgage originators (that would be me) complete the required documents on line and submit them directly to the non profit. The gift money will be wired directly to the title/escrow agent at closing. The seller's contribution will be sent to the non profit after closing.
- Who is eligible for a DPA? Anyone buying a home with (primarily) FHA financing. The main limiting factor is finding a seller willing to contribute to the program. There are a limited number of conventional loan programs that allow DPAs.
- Why use a DPA? Simply put, the program is for people that don't have the down payment to purchase a home but are otherwise ready and able to be homeowners.
There are more questions and answers, but suffice to say, the program works to help people purchase homes. It has been my experience that the only time the program works is in a "down" real estate market. That is one in which sellers are willing to make concessions to sell their home. In an "up" market where no seller concessions are necessary, DPAs normally are not a viable avenue. This, being a "down" market, DPAs have re-emerged to help sellers sell their homes and help buyers buy those homes.
As an experienced FHA lender, I have experience with DPAs and am waiting to help you with your purchase or your sale. Call me today at 541-342-7576.
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