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Down Payment Assistance Programs Unlock the Door to Homeownership

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The current housing market is ripe with opportunity. Interest rates remain low, credit availability is expanding, and employment is on the rise. For many hopeful homeowners, however, one hurdle they may not feel comfortable getting over comes in the form of the down payment. In fact, many buyers (and real estate professionals) believe that in order to purchase a home, a 20 percent down payment is necessary. Luckily, this long-held notion is untrue, but its widespread belief locks out thousands of potential homeowners who may have great credit and a steady income but less than 20 percent in their savings account.

As a real estate professional, this information is vital, as it opens up your business to an entire fleet of clients you may have previously believed were ineligible.

So where can you direct potential clients who can’t afford a large down payment? The answer is Freddie Mac. Options offered through Freddie Mac have long allowed for 5 percent down, and their Home Possible Advantage® mortgage is available to qualified borrowers with as little as 3 percent down. This nominal amount can even be provided through a gift from a family member or employer, or a grant from a government agency.

Dispelling the 20 Percent Myth
According to the Q1 2015 U.S. Home Purchase Down Payment Report published by RealtyTrac®, the average down payment for single-family homes bought in the first quarter of 2015 was 14.8 percent, down from 15.5 percent in 2014. Further, in 2015, about 40 percent of homebuyers put down less than 10 percent, and nearly a third of the 1.6 million loans funded by Freddie Mac were for buyers putting down less than 20 percent.

Below are a few simple steps you can walk your clients through:

  • Refer them to a lender with Home Possible Advantage. Freddie Mac works with more than 3,000 lenders nationwide, so there’s a good chance that one or more of the lenders you work with offer Home Possible Advantage, although they may call it by a different name.
  • Plan to live in the home. To qualify, your client must plan to live in the home they are financing, which nixes second homes and investment properties. Your client can also refinance their existing mortgage without taking any cash out. It’s available in 15-, 20- and 30-year fixed-rate terms.
  • Gather enough money. Although the down payment is low, your client must have funds to cover the down payment and closing costs. The good news is that these funds do not need to be their own. According to a June 2016 Freddie Mac 55+ survey, over 20 percent of 55+ homeowners said they have helped family and friends with a down payment.

Taking the time to educate your client is key, but you don’t have to do it alone. “Freddie Mac Borrower Help Centers and the Borrower Help Network deliver free counseling services across the country,” concludes Danny Gardner, vice president of Single-Family Affordable Lending and Access to Credit at Freddie Mac. “Equipped with knowledge and some help with the down payment, many households today are finding that homeownership is now within reach.”

Real estate professionals looking for more information about down payment assistance can visit www.FreddieMac.com/RealEstatePros.

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