The short answer: Down payment assistance is money from a government agency or nonprofit that helps a buyer pay the down payment or closing costs on a home. The down payment is the part of the price you pay up front. Closing costs are the fees you pay to finish the purchase. This help usually comes in one of three forms: a grant, a second loan, or a tax credit.
In Nevada, the statewide programs run through the Nevada Housing Division. A Valley West Mortgage loan officer can explain how these programs work.
Down payment assistance comes in three main forms. Freddie Mac, one of the two large companies that buy home loans from lenders, covers grants, down payment assistance loans and mortgage credit certificates. Here is how they compare.
| Type | What it is | Do you pay it back? |
|---|---|---|
| Grant | Money given toward your down payment or closing costs. | Usually no. Some grants ask you to live in the home for a set time. |
| Second loan | A second, smaller loan on the home that covers part of the down payment. Some defer payments until you sell, refinance or pay off the main loan. | It depends on the program. Some are due when you sell, refinance or pay off the main loan. Some are forgiven over time. |
| Tax credit (MCC) | A mortgage credit certificate, or MCC, lowers the federal income tax you owe each year. | No. It is a tax benefit, not a loan. If you sell within 9 years, a federal recapture tax may apply in some cases. |
“Deferred payment second loans, for which payments aren’t due until you sell, refinance or pay off the first mortgage.”Freddie Mac, My Home: How Down Payment Assistance Programs Can Help You Into Your First Home
Down payment assistance programs each set their own rules, so the answer depends on the program. Most look at the same few things:
In Nevada the statewide version of this is the Nevada Housing Division and its Nevada Home Is Possible program, which pairs a mortgage with down payment assistance for buyers who meet its income, credit, and homebuyer education requirements. Valley West Mortgage is not affiliated with or endorsed by the Nevada Housing Division, and the Division sets the current terms.
Nevada programs open, change and run out of funds during the year. A loan officer can check which ones are taking new buyers when you are ready to apply.
Down payment assistance can change your loan, so ask these questions before you sign up:
The CFPB is the federal agency that protects people who borrow money. It points to one more kind of help: “Sometimes local non-profit or government organizations can offer you a second mortgage on special terms” in place of a down payment. (Source: CFPB.)
The first step is a short talk with a loan officer at Valley West Mortgage. Bring a rough idea of your income, your savings and the price range you have in mind. A loan officer can explain how these programs generally work and what each could mean for your loan. Eligibility depends on each program’s rules and your own situation.
Sources
Valley West Mortgage is not affiliated with Freddie Mac, the CFPB or HUD.
Whitney Rush, Valley West Mortgage
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