These down payment and closing cost notes give general guidelines. See website and provider for specific program availability, requirements, restrictions and loan terms. We assume no responsibility for inaccuracies or program changes.
Three Steps to Mortgage Readiness
1. Get Free Counseling
Your home search counselors should be a Nonprofit Housing Counselor, the Realtor, and mortgage lender you’ve chosen from at least three interviews in each category, and your own internet research. Give weight to your final Realtor’s choice of lender, but know the choice is yours. Know the difference between a mortgage broker who has access to the programs of many lenders and a mortgage lender or banker who only works for one lender, usually a bank of credit union. Either may get the best deal for you depending on timing of program offerings, your needs (brokers are usually better for harder to qualify borrowers), and the broker or lenders expertise. Also, check your state, county, and local Housing Finance Agencies, Department of Housing and Community Development, and Department of Housing websites for local housing and special financing programs and eligibility. This will allow you to ask lenders when interviewing if they offer the grants and special financing programs for which you’re eligible.
2. Know Your Credit Score and Debt-to-Income Ratios
You can view a free copy of your credit report with any or all of the three national credit reporting agencies your mortgage lender will use at AnnualCreditReport.com. This is the only Site mandated by law to disclose your free report once a year. Your actual credit score is not included, but knowing what is on your report is the first step in becoming credit-ready for homeownership.
Your Nonprofit Housing Counselor will also pull your credit report. If the score is not an Experian Fair Isaac Risk Model (FICO), Equifax Beacon, or Transunion Empirica score, it is not the score a mortgage lender will use in determining your credit risk and eligibility for mortgage approval. In addition to your Counselor’s recommendations, educate yourself on credit at MyFico.com, ConsumerFinance.gov, and the Federal Trade Commission’s (FTC) websites.
Fair Isaac and Company invented modern credit scoring, and the two federal agencies above are tasked with educating and protecting credit consumers. Debt and income, along with credit score, are the most important factors in determining whether you qualify for a mortgage and for how much. Make sure you know your monthly debt obligation. Generally, it’s the monthly debt that shows as revolving or fixed on your credit report with some exceptions. Consumerfinance.gov has a good explanation of Debt To Income (DTI) ratios, which are your monthly debt payments divided by your gross monthly income. MyFico.com has a How Much Can I Borrow? calculator.
3. Get Preapproved
Get Pre-approved by the lender you choose. Don’t worry too much about the effect on your credit score of having two or three lenders pull you hard credit profile for all three bureaus if they’re all pulled within a two-week period. If you are a member of a Credit Union, consider them as one of your choices. Any “required lender” based on the down payment and/or closing cost assistance program your nonprofit housing counselor recommended should be a second consideration. For example, if you are approved for the D.C. HPAP program, there are certain lenders approved for that program. You must use one of these lenders in order to obtain the funds. Your primary bank is a third option but do your research. Ask for recommendations.
Each lender is required by law to provide a Loan Estimate (LE) within three business days of mortgage loan application. It’s much easier to compare lender quotes by comparing the Loan Estimates. They were designed to make the mortgage finance offer more transparent and understandable. Compare all terms, particularly the Annual Percentage Rate (APR) which takes into account sometimes hidden fees.
Once you choose a lender and know what programs and possible downpayment and closing cost assistance you qualify for, get a preapproval letter, and you and your Realtor are ready to find your home. As a pre-approved buyer, you are second only to a cash buyer with no appraisal required in the eyes of a seller comparing potential buyer contracts.
PROGRAMS AND SPECIAL FINANCING
NOTE: Many programs are income restricted. For example, a program may say, “Only for homebuyers at 120% of Area Median Income.” To find your Area Median Income, go to: https://www.efanniemae.com/sf/refmaterials/hudmedinc/
HUD Approved Housing Counseling Agencies (Nationwide):
https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
HUD Good Neighbor Program (Officer/Teacher/EMT Next Door)
50% Sales Price Discount for Homes Purchased in HUD Revitalization Areas
Program is for law enforcement officers, pre-Kindergarten through 12th grade teachers and firefighters/emergency medical technicians. See your FHA approved Mortgage Loan Officer or a FHA Homeownership Center Check for properties here: HUD Homes for Sale to the Public. https://www.hud.gov/program_offices/housing/sfh/reo/goodn/gnndabot
Veterans Administration Home Loan Program
United States Department of Agriculture Single Family Home Loan Program
Check by State for Eligible Rural Areas
Community Development Block Grant (CDBG) Programs
Administered by States and Localities. Check your local Department of Housing and Community Development, Housing Finance Agency or HUD Approved Housing Counseling Agency to track how funds allocated under this federal program have trickled down to your local area. https://www.hud.gov/program_offices/comm_planning/communitydevelopment/programs
Neighborhood Stabilization Program (NSP) Grants
Administered at the local level. Funds are provided to purchasers of foreclosed or abandoned properties. Check the website below for local providers of these downpayment, closing costs, and financing assistance funds. https://www.hud.gov/program_offices/comm_planning/neighborhoodspg
Also Check for State NSP Funds: (ex. Nevada – Neighborhood Stabilization Program Also Check for County NSP Funds: (ex. Prince George’s County MD NSP )
Housing Choice Voucher (HCV) Program
Allows families accepted under this program to receive a homeownership voucher to buy a home and to receive assistance meeting monthly housing payment obligations.
Housing Choice Voucher Program Fact Sheet | Local Public Housing Agency (PHA)
Low Income-Housing Tax Credit Program (LIHTC) (for Real Estate Investors)
The federal Low-Income Housing Tax Credit Program was authorized under Section 42 of the IRS Code of 1986. It provides a federal tax credit against income for developers of affordable rental housing. Investors in housing for low-income families can also receive incentives under this program. A credit is a dollar-for-dollar write-off against income owed.
Opportunity Zones (for Real Estate Investors)
The 2017 Tax Cuts and Jobs Act created Qualified Opportunity Zones to spur investment and job creation in distressed communities. Qualifying taxpayers may defer tax on capital gains by investing in these areas according to established guidelines.
Introduction to Opportunity Zones
http://www.hud.gov/offices/cpd/affordablehousing/programs/home/contacts/
STATE LEVEL
State Department of Housing and Community Development State Housing Finance Agencies
WASHINGTON, D.C. PROGRAMS
Home Purchase Assistance Program (HPAP)
Loan Terms: up to $202,000 in financing assistance and up to an additional $4,000 in closing cost assistance in the form of a loan. The amount of assistance and length of the loan deferment period is determined by your income and household size (see eligibility table). Requires contribution of greater of $500 or 50% of liquid assets above $3,000 (see eligibility requirements)
Immediately due and payable upon refinance, sale, or loss of Primary Occupancy Contacts –
Community Based Organizations**:
Housing Counseling Services (202) 667-7006 – 2410 17th Street, NW DC 20009
Latino Economic Development Corporation (202) 540-7401 – 1401 Columbia Road, NW, Unit- C-1
Lydia’s House (202) 373-1050 – 4101 Martin Luther King Jr. Ave., SW
University Legal Services (202) 889-2196 -1800 M L King, Jr. Ave., SE, 1st Floor DC 20020
University Legal Services (202) 547-4747 – 220 I Street, NE, Suite 130 DC 20002
University Legal Services (202) 527-7070 – 3939 Benning Road, NE DC 20019
Manna, Inc. (202) 559-2792 – 6856 Eastern Ave, Suite 100 info@mannahoc.org
Manna, Inc. (202) 559-2792 – 614 S Street, NW
Manna, Inc. (202) 559-2792 – 3425 A Street, SE
Marshall Heights Community Dev. Org. (202) 396-1200 – 3939 Benning Road, NE info@mhcdo.org
Employer Assisted Housing Program (EHAP