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How Does Downpayment Assistance Work?

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Anonymous
Not applicable

How Does Downpayment Assistance Work?

My city offers a down payment assistance program for lower income homebuyers. I plan to utilize this when I start the mortgage process in January since I meet all of the criteria. The program will pay up to 50% of the Downpayment and all closing costs not to exceed $8000 with at least $1000 coming from the borrower. The program also stipulates you can have no more than $5000 in cash assets.

The math:
Purchase Price: 85,000
Loan value: 82,025
Down Payment (3.5%): 2975
Est Closing Costs: 4500
Total I need: 7475
The program will pay $1487.5 of the down payment and I would pay $1487.5 of the down payment. Then it would also pay all of the $4500 closing costs, right? So, I could walk away paying only $1487.5? Even if I have $4000 in the bank?

My biggest concern with buying a house is that I will use all of my savings to buy it and no longer have that cushion in case of an emergency. I'd feel at ease knowing that I'd still have that $2500 in the bank after closing since I will not be able to save as much once I have a mortgage. Is this how it works?

Message 1 of 2
1 REPLY 1
StartingOver10
Moderator Emerita

Re: How Does Downpayment Assistance Work?

From your post it sounds like you have a great program there and that you understand it. In my experience, there are other guidelines with these programs that the people that administer the program know about and those of us that aren't directly affliated with it don't know those additional rules. The best thing to do is speak to one of the reps. They usually have a packet and additional info to give you over and above what the website states. They also usually have lender partners they prefer to work with for these programs.  

Message 2 of 2
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