Where Does the Down Payment Assistance Money Come From?

Down payment assistance in Florida makes home ownership more possible for more individuals and families. USDA financing offers $0 down options in rural areas within Florida, but not everyone wants to buy in a rural area — and USDA also has household income limitations. FHA financing in conjunction with down payment assistance saves the day, giving you the ability to buy with no money down.

FHA financing has no geographic limitations, and you can also buy a doublewide manufactured home constructed back to June 15, 1976. USDA requires a manufactured home to be 20 years or newer. The catch with FHA is the 3.5% down payment requirement. On a $300,000 house that’s $10,500. Not a lot of first-time home buyers have that kind of money laying around. That’s where down payment assistance (DPA) comes in — and the truth is you don’t even have to be a first-time home buyer.

As a mortgage brokerage we have over 250 lenders at our disposal. We use about half a dozen for down payment assistance, and they vary in their requirements. Below I’ll explain what can be done and what the limitations are across the spectrum of what we offer.

Repayable Second Mortgages vs. Forgivable Grants

Most down payment assistance programs in Florida are repayable. Even Hometown Heroes is a repayable second mortgage — and it requires you to work in a specific field, and often runs out of funds.

Depending on the DPA program used, the rate on the second mortgage is about 2% higher than the rate on the first mortgage. The term is 10 years. So let’s look at the example for that $300,000 house with a $10,500 down payment. If the first mortgage rate was 6%, the second mortgage at 8% over 10 years would have a payment of $127.39 a month.

We do, however, have a couple of grant options that are 100% forgivable. That means you would have no payment at all, and not even a balance to pay back upon refinancing or the sale of your home. Certain restrictions apply for a forgivable grant — stricter debt ratios and possible income limitations — but more often than not, it’s possible.

Some lenders also provide a forgivable second mortgage instead of a grant. The loan must be in place for 10 years and has a 0% interest rate.

Is Down Payment Assistance Right for You?

Minimum Credit Score Requirements

The lender providing the second mortgage or the grant for down payment assistance will also need to do your first mortgage. The minimum credit score required is 580, but most wholesale lenders providing DPA require a 600 credit score. Remember we always look at the middle score of the three bureaus.

Income Limitations

Most of the time there are no income limitations. The lenders that provide a forgivable grant for the down payment do have income limitations in some cases. For example, if you aren’t a first-time home buyer and you want to use a forgivable grant, your income can’t be over 140% of the area median income for the area you are buying.

If you have not owned a home in 3 years you are considered a first-time home buyer and the AMI requirements are waived. You can make a million dollars a year and still use down payment assistance. If you’re not a first-time home buyer and you want a forgivable grant, let us check your specific area in Florida — area median income (AMI) changes yearly.

What About Closing Costs?

Even though your down payment is covered, you still have closing costs. Depending on the sales price of your home, closing costs can range from 3% to 6% of the sales price. If you’re truly trying to keep your out-of-pocket expenses to a minimum, you need to negotiate for the seller to pay your closing costs. FHA financing allows you to ask for up to 6% of the sales price to go toward closing costs and pre-paid items like home owners insurance and property taxes.

Be prepared to pay for an appraisal — anywhere from $500 to $700. Other home inspections will be voluntary but recommended.

How We Help You Use Florida DPA

Don’t Let the Down Payment Get in the Way

There is no shame in using down payment assistance — whether you are a first-time home buyer or not. The shame is in not buying a house when you know you can afford one but you just can’t front the down payment. Apply for a pre-approval below to get started. On weekdays we will review your application within 24 hours or less.