Programs that work with down payment assistance (DPA) have been around for years, but DPA program availability has not been as plentiful as it is right now. Prior to 2021, funding for state and county DPA programs was minimal if any. But wholesale mortgage companies did have proprietary down payment assistance that didn’t depend on state and federal budgets, and because of this, these programs became very popular. Currently, most state and federal DPA programs are funded and the increased variety of these programs along with proprietary wholesale mortgage DPA programs are especially beneficial to licensed mortgage brokers who can use all of these programs.

Still, as I talk to loan originators, negative perceptions of DPA programs exist. Why are loan originators often adverse to originating loans that include down payment assistance? Here’s a list of reasons, and why these reasons can be overcome.

• For mortgages that include DPA, there are often two sets of underwriting guidelines to know to qualify a client. One is for the first mortgage and one is for the DPA 2nd loan. This is a great deal of criteria to be aware of.

• Combining the criteria for the 2nd DPA loan to the first is a matter of obtaining the DPA 2nd guidelines and assimilating them with the 1st mortgage guidelines. At Clients2Homeowners.com, this was started by providing the links for DPA programs in Florida. Loan Originators can go to DPA websites throughout the state and retrieve underwriting criteria to check client qualifications such as income eligibility, what kind of mortgage and house type the DPA is available with, minimum credit scores, and more. After locating eligible DPA, find the 1st mortgage programs you can originate that allow for a DPA loan to be included and get signed up with those DPA programs!

• Downpaymentresource.com is a national database of almost all state and federal DPA programs and also includes many wholesalers and proprietary DPA programs. The site has a separate program for loan originators, real estate agents, and lenders that provides accessibility to clients looking for DPA through Down Payment Connect.

• Most of the programs have an income cap that is perceived as being low resulting in a lesser selection of lower-priced homes to purchase. In today’s real estate market, many think the limit on income, (therefore sales price) puts consumers wanting or needing to use DPA programs out of the current highly competitive real estate market.

• There is an income cap on most DPA programs. However, the maximum income is higher than you think! Go to these links for Area Median Income (AMI) Income caps per program requirements:

 ✓ Federal Housing Administration (FHA) Housing and Urban Development (HUD) income limits

 ✓ Fannie Mae Area Median Income Lookup Tool

 ✓ Freddie Mac Home Possible Income and Property Eligibility Tool

Please note that you may need to insert an address to pinpoint income. Some programs base income on total family size while others base income on the homebuyer qualifying for the mortgage.

• Loan originator compensation is lower for programs that include a 1st mortgage and a 2nd DPA loan to worry about.

• Often true. But many DPA programs underwrite the 1st and 2nd DPA loan with one underwrite! Also, the DPA available can be sizeable and can cover DPA and closing costs. In today’s sellers’ market, having another source for DPA and closing costs where no contribution for the seller is needed can put a borrower in the running for a home!

• Loan originators need to be approved by the entity providing the DPA programs and may not be when the program is needed. Further, contract deadlines will need to be longer when these loans are originated.

• DPA agencies usually require a one-time or once-a-year registration. And many of the DPA agencies will look at the DPA application parallel to submitting the first mortgage, and even as a credit-only submission.

Clients2Homeowners.com is a website that was made with the initial purpose of introducing loan originators, realtors and prospective homebuyers to the services of HUD-approved housing counselors who help clients who are getting “mortgage ready”, throughout the process of purchasing a home, and even with post-purchase issues. Resources to help prospective homebuyers include information about down payment assistance, credit help (NO, not credit repair! And YES, building credit and help with student loans!) home budgeting, and how to find a HUD approved counselor for what is needed.

Especially now in this sellers’ market, utilizing down payment assistance can be a benefit for loan originators. There are even DPA programs that allow renovation. Call to find the right DPA for you, 727-534-3445.