Episode Transcript
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Phil (00:00):
Welcome to the first
time home buyers podcast . I
(00:03):
wanted to talk today about aspecific down payment assistance
program that is a three anda half percent fully forgiven
after six months program.
So let's go ahead and jumpin and take a look at this.
(00:23):
I want to talk about whatis down payment assistance
This empowered three anda half percent program.
What the qualifications are, thelimitations and then what you
need to do to get started on it.
So let's jump right in.
First of all, what is DPAdown payment assistance.
And really it's justa program and there's
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thousands of them out there.
And it's gonna be a programthat's gonna help you with.
Becoming a homeowner by helpingyou financially come up with
extra funds for closing costsor for your down payment.
Your lowest usually is aroundthree and a half percent
for your down payment.
And usually anywherebetween one, two or 3%
(01:05):
for your closing costs.
And so finding a program thatcan help you with that means
you don't have to come up withas much money upfront, which is
one of the number one barriersto entry to home ownership.
So what it really does isa monetary program and it's
supposed to help you get intoa home by making it easier
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to get that down payment.
Or your closingcost taken care of.
Now it can cover all of yourdown payment part of it.
Or your closing costs.
You don't have to useall of it in some cases.
And so there's lots ofdifferent programs and
lots of different stylesof down payment assistance.
There are usuallyeligibility requirements.
a lot of times there areincome limits, like I said
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before credit score minimums.
sometimes it's also locationbased or residency based.
Let's go ahead and talk aboutthis particular program and
it's the empowered 3.5% program.
They also have a 2%.
So I'll talk a little bitabout both of those, but
we've partnered with EP M wholesale here with
Patriot Pacific financial,and really try to offer a
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forgivable government grant.
For either two.
or three and a halfpercent, and it can be used
towards your down payment.
And, or your closing costs.
So if you haven't quitegotten enough money to cover
all of that, This couldmake up that difference.
This program uses the standardFHA loan requirements and
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really what that means.
Is if you can getapproved for an FHA loan.
You should be able toget approved for this.
It has that 2% or the threeand a half percent again,
use it for closing costswith the 2% oftentimes, or
if you need just that littleextra or three and a half
percent, and it can take careof your entire down payment.
It's forgiven after aboutsix months and the program
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is eligible in all states,but Washington, Washington
has some restrictions on downpayment assistance programs So
This one doesn't work there.
This does also allow anon occupa co-borrower.
So what that means is maybeyou don't quite have enough
income for the home you'relooking for, and you want
someone to co-sign, butthey're not gonna live there.
Sometimes this could belike a brother or a sister,
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something like that.
They can use thisprogram with you.
Only one person on theloan has to be eligible
for the down paymentassistant qualifications.
So let's talk aboutqualifications.
You only need to qualifyfor one of these and
only the main borrower.
If you have a co-borrower,they don't have to
also qualify for this.
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So let's talk about themand then I'll go into a
little bit more detail.
First is you have to be afirst time home Second option.
a current retired employmentor volunteer non-paid member.
Third income restrictions.
So that's pretty standardon a lot of these down
payment assistance programs.
That's one of theoptional requirements.
Or if you're in an underservedcensus tract, you do have to
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have at least a 620 FCO score.
If you don't have that,you're not gonna be able
to get into this program.
And you have to take a homebuyer counseling class.
That's it.
Let's talk about thequalifications in a
little bit more detail.
The first one is, are youa first time home buyer?
And really all that meansis that you have not owned
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a home in the last three Aslong as you haven't owned a
home in the last three years,you can be considered a first
time home buyer and you'llbe eligible for this program.
Doesn't matter aboutincome, things like that.
As long as you meet thatminimum credit score.
You've got the income.
And you've got thatfirst time home buyer.
You haven't owned ahome in three years.
You can qualifyfor this program.
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The second is what jobyou've got current or
retired employment,volunteer non-paid members.
So basically if you've everbeen military first responder,
an educator, if you'veever been in the medical
profession or civil servant,And what's great about this
program is it's very open.
to different kinds of roles.
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So you don't have to have beena doctor or a nurse, but if
you worked in a daycare centerthat counts as educator, if
you were a CNA that counts asbeing in the medical profession.
And so it makes it alot easier for you to
qualify for this program.
The next one, thethird option is income.
So this is pretty standard.
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And what they use is 140% of thestate or county median income.
And so I pulled acouple examples here
in Southern California.
Riverside county limitwould put you at about
$122,000 income max.
Orange county wouldbe at about 137,000.
And that's household income.
So total gross income.
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That's probably a limitingfactor for a lot of people
to be able to get into alot of these down payment
assistance programs.
Most people are gonna qualifyunder the first time home buyer
or under their job profession.
The last is underservedcensus tract, and this is
typically someone that'sin a low income area or a
designated disaster area.
And if that's the case, thenyou're pretty much already
(06:06):
qualified into this programand they really want to
be able to help you out.
It's not as commonas the other ones.
So there are gonna besome limitations, but
they're not that bad.
This is very much likeyour standard FHA limits.
Although to start off, it hasto be a single family home.
It can only be one or two units.
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You can't have athree or four unit.
However, you can doa manufactured home.
It has to be either asingle wide or a multi wide.
It has to be constructedafter June 15th, 1976.
On a permanent foundation.
So 4 33 a certified and it hasto be on land that you own.
It can't be in like apark or a land, lease.
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You do have to do 3.5%minimum down payment, which
is standard for an F H A loan,but you're allowed to get
up to 6% seller concessions.
And what we see with thisprogram a lot of times is
people will use the threeand a half percent down.
And as part of the purchaseagreement, they get two or 3%
concessions from their seller.
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And that coverstheir closing costs.
It has to be a 30 year term.
So pretty standard FHA, 30years, your debt to income
ratio Can go up to 48.99%,which is pretty good.
There are no resalerestrictions.
So you can sell this after thatsix months and no penalties.
Again, it's not eligiblein Washington state.
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You can't combine it withany other down payment
assistance program.
And you can't useit for anything.
That's non f a.
And the last thing to note.
Just like anything,nothing is free.
This does cost a little bitmore from your interest rate.
Typically your interest rate isgoing to be about 7.5 or 7.75%.
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Right now, whichis mid April, 2023.
We're seeing standard FHA loansin the low to mid 6% range.
So this is a little bithigher about a percentage
point higher than you wouldget without the program.
And what I did see when I ransome scenarios earlier is on
a typical house, like maybea $300,000, $400,000 house.
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It's a few hundred dollardifference per month.
But the difference also isthis could get you into a home.
With no down paymentmoney out of pocket.
So I hope this helpsgive you guys a general
idea of this program.
You can kind of tell it'sone of my favorite down
payment assistance programs.
Not only do I really likeit because it's forgiven
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after six months, the creditrequirements are pretty low.
You don't have to worryabout your income being
a restricting factor.
But we close these fast threeor four weeks and we can
typically close them, justlike a regular FHA loan.
And you don't have to worryabout how long is this gonna
take this extra governmentprogram and all kinds
(09:02):
of extra authorizations.
They do an amazing jobat getting this done.
So if you guys haveany more questions,
head on over to ft hb pros.com.
We've got all of our podcastepisodes available, articles,
newsletters, resources, alongwith our Facebook group where
we've got different lendersand agents all there to
help answer your questions.
So thank you againfor your support.
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Happy home buying.