Do you need to come with a good down payment to get approval for a home loan program? Are you short on cash for the down payment? Then, you can opt for down payment assistance programs. Sponsored by federal, state, local governments, and private non-profit organizations, you will be grant finance through these programs for paying down payment or closing costs.
But can anyone opt for down payment assistance to purchase homes in Texas? Or is there any criteria? Well, there are several things that determine your eligibility. Here are the ones –
Based on the kind of down payment assistance program you want to opt for, your income may need to be less than 80% of the local median income. Some programs have more liberal standards of 120% or more of the local median income.
- Credit score
Down payment assistance programs often need homebuyers to possess a minimum credit score to check their creditworthiness. The most common benchmark is a score of 620 to 640 or more than that. But you should keep this in mind that the higher the score, the better it would be for you. So, you should check your credit score from the three major credit bureaus and if you find that it is not up-to-the-mark, you should take steps to improve it.
- Debt-to-income ratio
Not all types of home loan programs restrict the debt-to-income ratio of the buyer that is the percentage of monthly income. Of those that do, 43% is the typical maximum debt-to-income ratio. It is similar to the ratio a mortgage lender will require.
- Home price
Many programs will only assist buyers who have their eyes on a home selling for about the median local price, or a little more.
Probably you will need to promise to live in the home for a few to several years. Loans to non-occupants are riskier. So, lenders want to make sure they are pricing the loan correctly. But the intent is the key. If something comes up after a year and you need to move, you will need to notify the lender about this. Moreover, you can get down payment assistance for small multi-family properties of up to four units in case you are going to occupy one of the housing units.
- Prior homeownership
Most of these programs are limited to first-time homebuyers. But they often define the term loosely. Even if you have previously owned a home, you might be able to regain first-time buyer status after 3 years have passed since you last owned one.
So, check whether you can fulfill the eligibility criteria for a down payment assistance program and then opt for a program that will be the right choice for you.