Equal Housing Lender
Confusion Still Exists About Down Payment Assistance (DPA) for Many Loan Originators.
By Pam Marron | Clients2Homeowners.com • Mar 16, 2022
Here’s How to Organize DPA for Your Area and Start Selling!
The problem is that DPA second mortgage underwriting criteria is often different than the guidelines for the first mortgage. But close attention to these 2nd mortgage differences and applying these criteria to potential DPA clients FIRST is the key to making these programs work.
Additionally, there are two ways these programs are offered. Either:
- The first mortgage and DPA 2nd mortgage are provided together and underwritten and closed at one institution.
- The DPA program is a second mortgage offered from a separate institution that can be added to your clients first mortgage.
When I initially started using DPA programs, I too had a bad experience. Yep, I got an approval on the first mortgage but not on the DPA 2nd mortgage and the scrambling to find funds occurred a week before closing! To make sure this never happened again, I set up a Down Payment Assistance “At a Glance” spreadsheet with common detail about DPA programs within my area. As I find out about other programs, they are added.
Answers needed for questions about each DPA program is put in the first column of the spreadsheet. Because I am a mortgage broker, I offer DPA where the 1st and 2nd mortgages are provided and underwritten by one lender, as well as 2nd mortgage DPA provided by housing counseling agencies (HCA), county SHIP programs, city programs and Community Reinvestment Act (CRA) funds that can be added to my client’s 1st mortgage. Make your own grid on an Excel spreadsheet, or download ours.
| Institution Name, contact info. | Institution Name, contact info. | |
|---|---|---|
| 1st and 2nd mtg together | 2nd mtg only | |
| DPA website | ||
| Loan Originator need to be approved with your inst? | ||
| Avail. Fund $ | ||
| Geographic Area DPA provided to | ||
| Min. Credit Score | ||
| Max DPA% | ||
| Max DTI | ||
| Are DPA payments included in DTI? | ||
| Max. CLTV | ||
| Max. Broker Comp | ||
| Lender Paid allowed? | ||
| Max. seller contrib. and %? | ||
| Avail. for FHA? | ||
| Avail. for Conv? | ||
| Is non-occupying co-borrower allowed? | ||
| Min. contribution from borrower: | ||
| Does client make payments on 2nd after closing? | ||
| Is 2nd forgivable? | ||
| Does 2nd have to be paid back? | ||
| Is DPA only for 1st time HB's (not owned in last 3 yrs)? | ||
| Is income calculated by total household or just borrower income? | ||
| Addit. Fees: | ||
| What are Max Income limits? | ||
| Provide Link to max income levels. | ||
| Is education cert. from HUD housing counseling agency acceptable? Names/locations of HCA’s. If no, note education needed and from where. | ||
| Does loan need to be run through FNMA or FHLMC AUS? If yes, which one? | ||
| Unique program trait(s) |
Resources and Marketing
- Check into DownPaymentResource.com. This national DPA tool provides loan originators, realtors and lenders as well as homebuyers with the ability to find all DPA programs in your area.
- Sign up for Down Payment Connect through DownpaymentResource.com. As a member, you receive a logo to put on your promotional pieces that states “Ask Me About Down Payment” and links to a personal Down Payment Connect page where you can designate the DPA programs that you work with. Interested clients are directed to you for DPA help. Additionally, an incredibly comprehensive list of all DPA programs in your state is available to you and kept up to date with fund availability, program details and contact information for all programs.
- Promote your spreadsheet on your website. This gives credibility to the fact that you offer DPA and provides prospective clients with information to know upfront if they eligible for DPA programs.
- Get on County SHIP, city and CRA DPA program lists as a loan originator who is familiar with their DPA qualification criteria.
- Sometimes funds from multiple DPA program can be used together.
- Just a reminder…. Check with your clients on other funds that may be available for down payment:
- tax return refunds
- loan against 401K
In todays housing market which favors cash buyers, having down payment assistance for clients in your tool box can make the difference on a deal.
So, what do you need help with?
Down Payment Connect is already being used by MLOs and Realtors. Now it's available to HUD Counselors through HomePrep! Down payment assistance is quickly rising to the top need for clients wishing to purchase a home. Down Payment Connect , the back-end data provider for the parent Downpaymentresource.com , houses every down payment assistance program in the US and provides extremely detailed information laid out in a consistent format for each DPA program in their system. Throughout the last two years, Downpaymentresource.com administrators have worked with MLO’s and the HomePrep developers to add nearly all wholesale down payment assistance programs to their platform and they didn't stop there! Extensive filters that allow for selection of specific client needs such as type (ie. SFR, manufactured homes, condos, multi-family, ADU’s), uses like renovation, above AMI income levels, non-1st time homebuyers are just a few of the filters you will find along with stand alone 2nd mortgages, combined 1st and 2nd mortgages and grants. DownpaymentResource.com is also in many MLS systems across the US and provides limited directory information and a free landing page for realtors to promote that they use DPA. Both MLO’s and realtors can subscribe to Down Payment Connect to get more of the extensive directory and back-end tools. Now, through HomePrep, HUD counselors can also use the Down Payment Connect system to filter trhough DPA programs that clients are qualified for, and can even provide wholesale programs when working with an independent loan originator (often called a mortgage broker)! Through HomePrep, HUD counselors are now able to provide MLO’s and clients with the DPA programs that they have found the client is eligible for.
If you have FFEL Student Loans, Take Action Before April 30th!
Three great tools that mortgage loan originators (MLO) can use to assist clients who need help with credit, down payment assistance and student loan repayment services have been used, fine-tuned and are already in use with individual MLO’s. These tools combined with the Freddie Mac HomeCoach automated system along with budgeting help and Homebuyer Education are all integrated in the HomePrep online platform that connects MLO’s with clients who have challenges to HUD counselors that get them mortgage ready.
Pam Marron, NMLS# 246438
Innovative Mortgage Services, Inc. NMLS# 250769
