First Time Home Buyers can Get Down Payment Help

In California, many cities and communities are offering down payment assistant (DPAs or DAPs) programs for first time home buyers. First time home buyers are defined as those people that have not had a mortgage in the last three years. The DPAs from these different cities and from the State of California can add up to quite a bit of money. In these tough times the assistance comes as great news to young couples and people who are tired of throwing their money away every month on rent.

Paying rent is like paying someone elses mortgage for them. And the difference between renting and owning is usually not all that much after you look at all of the combined benefits of owning. Everyone knows that when you have a mortgage you can deduct a percentage of the interest you pay each year on the loan from your income taxes. Few are aware that right now the State of California is giving first time home buyers a $10,000 tax credit which is spread out over three years. That is a lot of money and it is definitely stimulating the home buying market right now when the economy needs it most.

But that is not all the assistance that first time home buyers can count on. Many cities and municipalities around the state are offering down payment assistance programs. The city of San Leandro, California, for instance will give first time home buyers who qualify up to $30,000 in down payment assistance. This is real cash that goes towards purchasing the home. The city of Hayward has a similar program and the City of Alameda goes even further with a down payment assistance of up to $50,000.

Most of the down payment assistance programs require that the borrowers attend a city sponsored first time home buyers seminar which usually lasts around five hours and where they get a lot of useful information about purchasing a home.

Borrowers need to qualify for a FNMA (Fannie Mae) underwritten first mortgage at or below 80% loan to value. For example, if the property that they are purchasing has a price of $300,000, then the first loan amount would have to be $240,000. The remaining $60,000 would be the down payment portion of the deal. Throw in the city DPA of $30,000 and now all you need is another $30,000 to get into the house.

There are other programs as well like CHDAP, run by the State of California. This program will contribute up to 3% of the purchase price for first time home buyers. First time home buyers need to have credit score minimums of 640 but that is actually very low and most borrowers have no trouble with that. They also must come up with 3% of their own cash to purchase but the gifting rules are very lax and that can come from other sources. Most programs allow seller contributions to closing costs also.

All in all, this is a great time to be first time home buyers in California. If you do your homework right, you can end up in a nice home with very little out of your own pocket.