Overview of Colorado Down Payment Assistance
There are a variety of down payment assistance programs available to homebuyers in Colorado.
Some assistance programs are sponsored by government or non-profit agencies have specific requirements including the buyer being a first-time homebuyer, and maximum household income limits. Some programs require monthly repayment, others require repayment on sale or refinance. The details of these programs change depending on location. Please talk with your mortgage consultant for more information about specific options that may be available for the community in which you plan to buy your home.
Other assistance programs, such as Nehemiah, HART, and Ameridream, are available to everyone. I call these "loophole assistance programs" as they take advantage of a loophole in HUD's source of funds rules.
The loophole is this: These programs all use the seller to make the down payment. HUD (FHA) says the seller is not allowed to make your down payment - so what these programs do is set up a grant program where everyone is eligible. The down payment is made out of the grant money. After the seller has sold their home, they make a 4% (of the cost of the home) donation to the grant program. The grant program retains 1% of this money to cover administrative costs - and 3% is passed back into the grant pool. In some cases the seller's contribution is less than 4% but never less than 3%. The administrative costs of these programs varies from program to program.
The downside of the loophole programs is that you are relying on the seller to take a 4% (or similar) reduction on what they'll make when they sell their home. Note: The buyer is not allowed to inflate the offering price of the home to compensate for the seller's loss of proceeds.
It is important to note that the use of down payment assistance of any kind can have an adverse impact on the underwriting process (it can be seen as an increased risk factor).
Generally speaking, down payment assistance is utilized in conjunction with an FHA loan, but there are exceptions to this rule (assistance is sometimes combined with conventional mortgages as well). The reason FHA is most frequently used is that it has a specific provision in the source of funds underwriting rules that allows for down payment assistance as the sole source of money for down payment.
Please talk with your mortgage consultant about which loan programs are best for your situation and what, if any, down payment assistance programs are available to you.
Last updated: [an error occurred while processing this directive]
Copyright ©2002-2004 iHomeLoanInfo.com, All Rights
Reserved.
Copyright and Terms
of Use
