IA Capital

Down Payment Assistance

IA Capital can provide guidance to those interested in exploring downpayment assistance. These programs help homebuyers cover a down payment and sometimes even closing costs. Potential homebuyers who can make a house payment with no difficulty sometimes can’t buy a house because they don’t have the funds required for a down payment and closing costs. Prospective buyers who don’t have the funds to close on a home might consider using a downpayment assistance program.

Downpayment Assistance Explained
Home sellers can help buyers pay closing costs by giving a portion of their proceeds back to the buyer at closing. The amount of seller assistance allowed depends on the buyer’s loan.

Sellers are prohibited from giving homebuyers down payment funds, but gift assistance programs provide a “work around.” When the transaction closes, the downpayment funds are wired from the gift assistance program to the closing agent. The seller has no part in the transfer of funds.

HUD and Gift Assistance

Here’s what HUD says about the programs:

“HUD does not approve “gift” programs administered by charitable organizations and, thus, will not offer a formal approval of your program. Mortgage lenders are responsible for assuring that the gift to the homebuyer from the charitable organization meets the instructions described in HUD Handbook 4155.1 REV-4, CHG-1 Paragraph 2-10(C) (e.g., no repayment implied, etc.). Those charitable organizations that comply with existing regulations and policy guidelines are permitted to give cash gifts to eligible homebuyers and do not need prior FHA approval to do so.”

So HUD does not issue formal approvals for gift programs — it puts the burden on the lender to work with a legitimate program. The major programs all appear to comply with HUD requirements. Your lender can verify that the program you choose is acceptable.

Downpayment Gift Assistance Programs FAQ

The basic services.

  • Homebuyers must qualify for a loan that allows gift funds.

  • There are no minimum or maximum income requirements for buyers, but there may be top limits set on the sales price of homes.

  • Typical assistance seems to range from 1 to 7 percent.

  • Funds can be used for the down payment and for closing costs.

  • Gift funds can be used for new or existing homes.

  • Unused funds must be returned to the gift program.

  • Assistance programs cannot be used to refinance a house or to make home improvements.

  • Sellers cannot use the gift as a charitable contribution, but it may be deductible as a selling expense. Talk to a tax professional.

The IA Capital Downpayment Assistance Fund will not work with every home mortgage loan program or lender. However if you are interested in buying a home and want to utilize this program, contact one of our loan consultants using the link below for additional help.

Loan Specialists are available for potential and existing home owners and provide one-on-one personalized guidance and support. Whether you are in the exploratory phase seeking to determine if you qualify for a mortgage, or are a seasoned pro and looking to add to your real estate portfolio, we can help.

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