What exactly is a Down Payment Assistance Program? and How will it help me buy a home in Utah using an FHA Loan?
To answer these two questions let me first explain that the FHA Mortgage Program in Utah requires that you invest 3% of the purchase price towards the home. For example that would be $6,000 on a $200,000 home. Many people don't have 3% to put towards the home. Let's face it with a negative 1% savings rate (I think that's the right stat) not many people even have $2,000 in their savings and checking account combined. And even if they do then do they really want to drain their savings to get into a home? Probably not!!!
So...enter the Down Payment Assistant Program. The FHA Guidelines in Utah state that the 3% can come from a relative or a non-profit foundation (which there are plenty of)! In fact there are many non-profit foundations that have been set up for Down Payment Assistance in Utah.
You may ask: Where does the money come from? In order for this program to work the seller of the home must agree to donate the 3% ($6,000) to the Non-Profit Foundation which in turn will donate the money to you, the home buyer. This all has to be stated clearly in the purchase contract!
So if I'm the seller of the home and you, the buyer, need Down Payment Assistance then I will probably end up raising the purchase price of the home $6,000 to compensate for the donation to the Non-Profit Foundation. So consequently, who ends up paying for the $6,000 donation? You, the home buyer, do!! A higher purchase price means that you'll pay for that $6,000 for as long as you have the loan.
So does this benefit you, the home buyer? In my opinion absolutely! You didn't have to drain your checking and savings accounts to come up with your down payment and you were able to use an FHA Mortgage in Utah with and attractive interest rate to accomplish this goal!
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