Lauren's Blog

What You Need to Know about Down Payment Assistance Programs

If you’ve been dreaming of owning your own home but can’t seem to save up for the down payment, you may have more options than you realize. Down payment assistance programs are designed to help make the dream of homeownership attainable even for buyers who haven’t had years to stash away cash.

But, there is a hidden cost.

The lovely Sara Keller (@therovingloanofficer) joined me for an IG Live sesh (watch it here!)  where she dripped sooooo much knowledge on down payment assistance programs. I learned a TON! Maybe you will too!

Here’s the short and sweet of it! 

If you’re new here, I’m Lauren Goché — a Portland realtor with a decade of experience backing me up. Which means I’ve weathered more than a few market shifts over the course of my career, and specialize in making sure you can make the most of the market for your goals. Read more about me here.

Meet Sara Keller

Sara (@therovingloanofficer) is one of our trusted lenders at Guild Mortgage. With 23 years of experience in the mortgage industry, she has helped countless people make their dreams of home ownership a reality!

If you have any home lending needs, or just have a few questions you need answered, Sara’s your gal! — get in touch with her here.

What is Downpayment Assistance?

As previously mentioned, downpayment assistance helps cover the initial cost of purchasing a home. This support can come in the form of a grant or, more commonly, a second mortgage. Typically, this assistance results in a second lien on the property.

These programs help make homeownership possible for buyers who otherwise could not afford the down payment from their own savings.

Busting the Myth of “Free Money”

When we start talking to folks about down payment assistance programs, one of the first things we try to address is this misconception that there’s just piles of “free money” out there waiting to be claimed. Now don’t get us wrong — there are a few grant programs where you truly don’t have to pay anything back. But more often than not, assistance is coming in the form of a second mortgage and most programs will include some sort of repayment process. 

And as much as we’d all love a totally free ride… the reality is that most of the time you’re taking on additional debt that will need to be repaid down the road. Some of those second loans are forgiven over time if you stay in the home, and others you may be paying off well after closing. It’s also important to note that a lot of these programs come with higher interest rates that can end up costing you more in the long run.

So we try to be real upfront with folks — sadly, there ain’t no such thing as a free lunch in this housing game. The money might help you buy your dream home now without a big down payment, but you’re gonna be paying for it one way or another!

Bottom line is: If you have the money, do a downpayment! 

What Are Your Downpayment Assistance Options

Sara and I  covered so much detail in our live regarding your options. Without getting into too much detail, here is a quick overview of some of the most popular options for Oregon/Portland buyers:

  • Oregon Flex & Freedom: State program providing up to 4-5% assistance, income limits up to 125% AMI. Second mortgage is 0% interest if under 80% AMI.  Very generous income limits, allowing assistance for households making up to 125% of the area median income. For a family of four in Portland, that equates to $143,000 annually. Can be used for conventional, FHA, VA, and USDA loans.
  • Portland Housing Center: Various programs including Mortgage Assistance (grants), Boost to Buy (forgiven loan), and matched savings accounts. Income limits around 80% AMI.
  • Oregon Bond Program: Offers below-market rate loans, income limits around 120% AMI. Requires 20% down for conventional loans. Higher closing costs.  
  • National Fannie Mae/Freddie Mac Options: HomeReady and HomePossible provide small grants/lower insurance, income limit 80% AMI. 
  • Washington County Program: Provides up to $30,000 for first-time buyers, administered through Portland Housing Center. Income limits apply.
  • Layering Programs: Combining assistance sources like Oregon Flex with Portland Housing Center programs can provide over 30% of purchase price in help. Requires higher income levels.

Programs for Specific Demographics

Oregon Flex has an option targeted at single parents, people with disabilities, and households with four or more members, recognizing that these groups face unique challenges to homeownership. Other programs like Portland Housing Center provide expanded assistance and income limits to better serve marginalized communities. Their resources aim to promote equitable access and counteract systemic barriers that make home buying harder for some.

National Programs

Even if you don’t find a fit with state and local programs, national assistance may be available. Fannie Mae’s HomeReady and Freddie Mac’s HomePossible provide small grants and lower mortgage insurance for buyers with household incomes up to 80% of the area median. While benefits are modest at around $500-1000, every little bit helps. These conventional loan programs have the advantage of being available nationwide.

Why You Need a Good Lender

Let me be honest, this is some complicated sh**t. These programs have many moving parts and change often, so you truly won’t know what your options are until you get an expert lender who knows these programs like the back of their hand.

Your lender is gonna be the one helping you sort through the mess to see what fits your situation best. Great lenders like Sara can really pull some magic and layer different programs. 

Experienced lenders and loan officers know all the ins and outs of how various assistance sources can work together. Things like an FHA loan paired with state and local grants might be layered. Or a conventional loan could be combined with multiple second mortgages. 

The key is finding programs that have income limits high enough to overlap. An experienced team will look at all available options to see what can fit your unique financial picture. Layering allows some homebuyers to get over 30% of a home’s cost covered through assistance.

Of course, layering comes with more complexity. But a true pro can guide you through the process if the increased help makes sense. Always discuss your full situation before assuming layering is right for your needs. With the right strategy, this technique opens more doors.

If you want the best shot at gettin’ help, find yourself an ace in the hole. Someone who’s done this a hundred times and won’t let you down.

Wrapping Things Up…

Navigating the world of down payment assistance can be a game-changer for many prospective homebuyers. From state and local programs to national options, there’s a wealth of opportunities designed to make homeownership more accessible. However, it’s crucial to understand the terms and conditions attached to these programs, as the assistance often comes in the form of repayable loans or second mortgages.

The key takeaway is to approach these programs with a clear understanding of what they offer and their long-term impact on your financial situation. Consulting with a knowledgeable lender, like Sara Keller, can make a significant difference. Her expertise can help you navigate the complexities and find the best combination of assistance programs to suit your needs.

Remember, there’s no one-size-fits-all solution in the realm of down payment assistance. Each program has its own set of criteria and benefits, and what works for one buyer may not work for another. By doing your homework and working with experienced professionals, you can make informed decisions that will set you on the path to homeownership without unforeseen financial burdens.

If you have questions or need personalized advice, don’t hesitate to reach out to a trusted lender. And always keep in mind that while these programs can provide substantial help, it’s essential to understand the commitment you’re making.

Here’s to finding the support you need to turn your homeownership dreams into reality!