I wanted to chat with you about down payment assistance programs for mortgages. They can seem really appealing at first, but it's important to consider all the factors before jumping in.
You see, these programs involve a third party contributing funds to help you with your down payment. However, it's crucial to remember that this extra money is usually given as a loan rather than a gift. That means you'll have to pay it back, often at a higher interest rate. Plus, there are additional fees to keep an eye on. Some of these programs even charge origination fees, which could add up to thousands of dollars.
But it's not just about the financial side of things. The interest rates associated with these programs are often higher than what you'd find with a regular mortgage broker. So while it may seem like free money, it's important to consider the long-term implications.
Lenders get Richer
I would like to tell you all lenders have access to these Down Payment Assistance Programs..... but it's simply not true. The companies that typically have access to these programs are your Banks and National Lenders. The smaller Mortgage Broker shops, that historically save home buyers an avg of $9,000 dollars aren't encouraged to participate in these programs. By encouraged, I mean obstacles are put in their ways that make it unrealistic for them to pursue the option. Not that it would make the DPA Program any better.
I want you to think about that for a minute. The lenders that save you the most money..... aren't allowed to use the down payment assistant programs like Banks and National Lenders. It's just not sounding like a good program.
Wrapping it up
To sum it up, down payment assistance programs for mortgages may seem like an easy way to get into a home, but the risks and consequences associated with them are often not worth it. It's generally a better idea to save up and make a down payment on your own, or explore other financing options that won't put you at risk of defaulting on your loan or negatively impacting your credit score. Did you know you can take a loan against your 401k to use as a down payment. This loan won't count against your debt to income ratio and it's cheaper than the down payment assistance programs.
Thanks for taking the time to read this, and if you have any other questions or concerns, feel free to reach out. Need ideas on where to get money for a down payment? I have those too. Happy house hunting!
