Mr. Kablog and I bought our first (and only) house with about 3 percent down; some of that was even a gift from our parents.
It was 2002. We were engaged and I remember waking up one morning and thinking "Let's buy a house." It cost $149,900, so 3 percent wasn't a huge down payment by any stretch. But for two people in their early twenties at the start of careers, it was a significant chunk of change.
I hadn't been working in the field of personal finance journalism for very long and wasn't well versed in housing issues. For instance, I didn't know I should shop around for a loan; we went with the lending arm of the real estate company that our Realtor worked with. And I was too impatient to take a Home Stretch class.
I still wonder if a low-level public radio employee and a county government worker would have qualified for any down payment assistance programs. There are several, and Maria Verven, who does communications work for Edina Realty, put together a nifty list of various down payment assistance programs that I've pasted here.
The best thing of all is that most of these programs are eligible even if you get the $8,000 tax credit that I mentioned in my weekend story.
The Federal Housing Administration (FHA) offers 3.5 percent down mortgages. Qualified buyers must demonstrate that they will spend no more than 31 percent of their gross income on mortgage payments.
A VA home loan is a zero-down loan, which requires a military background with VA loan eligibility.
The Guaranteed Rural Development loan is a zero down loan designed for use in rural communities.
Down Payment Assistance Programs (DAPs) Homebuyers can also obtain low down payment loans on conventional loans with DAPs. Many community, city, county and state agencies offer DAPs, which have unique qualification requirements regarding income, assets, credit, occupancy and location. Some examples available in 2009 include:
HOME HELP: A federally funded loan for qualified first-time homebuyers that lends up to $14,999 in interest free funds for a down payment and closing costs; 70 percent of the loan is forgiven after five years. The goal of this DAP is to make housing more affordable by lowering the borrower’s housing debt ratio to 30 percent.
The Silver Lining Loan Program: This Dakota County DAP program loans up to $15,000 in interest free funds that can be used towards down payment and closing costs. Designed for use within specific Dakota county locations, this DAP is not exclusively for first-time homebuyers, although the borrower cannot own other real estate.
Homeownership Assistance Fund (HAF): This Minnesota Housing program awards eligible first-time homebuyers an interest-free, deferred loan – up to $3,000 – to help with down payment and closing costs. Homebuyers interested in the HAF should contact a Minnesota Housing participating lender prior to signing a purchase agreement. Participating lenders determine eligibility, which generally includes households earning 80 percent or less of area median income.
The St. Paul Heroes Program: This loan was created to honor those who dedicate their lives to serving the community, including active military personnel, firefighters, emergency medical technicians, paramedics, health care workers, police, teachers and public employees. This program awards up to $10,000 to first-time homebuyers who purchase a home in St. Paul in conjunction with the Take Credit!! Mortgage Certificate Program. This interest and payment free loan helps with down payment or closing costs and is forgiven if the borrower resides in the home over 10 years.
Pohlad Family Giving Foundation Homebuyer Assistance Incentive Program: All prospective homebuyers (not just first-timers) who want to purchase and occupy a home, condo, or town home in the zip codes 55411 (N. Minneapolis) and 55106 (St. Paul-Dayton’s Bluff) may qualify for an $8,000 grant for down payment and closing cost assistance. Buyers must intend to occupy the property as their principal residence for seven years, and they must close on their home on or before Dec. 31, 2009.