Homeownership 101: Types of down payment assistance programs
A down payment is the money a homebuyer pays upfront when purchasing their home. Down payment assistance (DPA) helps you cover your down payment as a first-time home buyer. There are different types of down payment assistance you can combine to purchase your home. These include grants, forgivable loans, deferred-payment loans, low-interest loans, and matched savings programs.
There are down payment assistance programs that exist on the federal, state, county, and city level, as well as from private sources, and they can be layered and used together, as long as they are not from the same source.
Getting Prepared: Build a Budget with Pre-Purchasing Counseling at Model Cities
Every dime in your budget has a job. Hold yourself accountable when preparing to purchase a home by making sure your household budget reflects your true spending. If you need help, Model Cities Housing Counselors are here to provide no cost pre-purchase homebuyer counseling. This includes, but is not limited to, helping you build and maintain a budget.
You have options: Buying a Home is Still Possible with Low Credit
It is common to think homeownership isn’t possible because of low credit. While some lenders accept lower credit scores, the interest rates and fees may be significantly more expensive. Conventional Loans from Fannie Mae and Freddie Mac require a minimum credit score of at least 620.
But, there are still loan options for homebuyers with low credit scores.
- FHA (Federal Housing Administration) loans have lower qualifying requirements for first-time homebuyers, including a minimum credit score of 580. Some even have a minimum score of 500, but require a 10% down payment.
- VA (Department of Veterans Affairs) loans have no specific credit score minimums, but lenders do, sometimes at a minimum of 580 score. VA loans also do not require a downpayment, which is an added benefit.
Things to know: Redlining & the Racial Homeownership Gap in MN
Minnesota is home to one of the worst racial disparities in the country, especially in Minneapolis and St. Paul, and a practice called “redlining” has played a major role in the racial wealth and homeownership gap. Model Cities is helping close the racial homeownership gap in Minnesota by providing HomeStretch workshops and Pre-Purchase Counseling to over 500 BIPOC homebuyers in the last 3 years.
