Life after the $17,500 down payment assistance program.

October 30, 2023

On January 26th 2023, RI realtors Published this article and introduced the realtor world to Rhode Island’s down payment assistance program that would create a whole new wave of home buyers..

It couldn’t get any easier right? 1–4-unit properties, 100% forgivable $17,500 that could be used for down payment and closing costs, and they only need a 660 score to qualify. What a great program for so many to take advantage of. What a great program for the family that has income and credit but just not the ability to put a down payment.

This program opened doors for many buyers and the realtors that represented them. But what happens now that this program has ended? What happens to those buyers and realtors? If you have clients that were planning on using the $17,500 DPA, it’s time to take a good hard look at what will you all do. The program allocated roughly $30 million dollars. At $17,500 per client, that allowed for 1,714 total buyers and now it’s over. I don’t need to bore you with numbers, you can look the numbers up yourself right in MLS, but I do need to warn you of what’s to come if ALL your eggs were deeply vested into the 17,500 baskets. Look at what happened in Massachusetts when the $50k assistance program ended, there were a lot of unhappy pre-approved buyers that found themselves with no options. There were a ton of realtors that had magical pipelines of buyers that instantly went up into smoke as well. Don’t let it happen to you!

Here are some helpful tips to help your borrowers overcome down payment now that this program has ended:

SAVE MONEY: Mid-sized lenders have the advantage in a market that’s not oversaturated with loan originators from the same company. This can provide more opportunities for loan officers to secure business.How much does your client pay for rent? How much more was their new mortgage going to be based on their pre-approval?

Let’s do a quick example:

John is paying $1,400 a month for rent, he was pre-approved with a maximum payment of $2,800 seven months ago. I told John that the best way to know if you can really afford to own is to “pay yourself”. Since John’s mortgage payment was going to be $1,400 a month more than his current payment, he should be able to write himself a check for $1,400 each month and put it into a new account “house account savings”. I also told John that if there was a time he couldn’t afford to pay himself $1,400, that would mean he would have been late on his mortgage payment. John followed my advice, and although he still hasn’t won an offer on a house yet, he does have $9,800 in a savings account ready to go for a down payment if needed.

401K LOANS OR WITHDRAWALS: Most 401k’s allow you to take the money to purchase a primary home. They also allow you to borrow up to 50% of your 401k and pay yourself back over time. This loan does not count in your monthly debts for the mortgage because it is a loan against your own assets.

GIFTS: FHA allows 100% of the down payment and closing costs to be covered by a gift.

ADDITIONAL DOWN PAYMENT PROGRAMS: Semper Home Loans offers several 100% programs – but unlike the $17,500, these programs do require the loan to be paid back. However, if they need the 100% option, this is a great way to get those funds.

Think about the time and effort you have invested into some of your clients that have been searching for months. Now that the program has ended, how many clients are now stuck looking for more options? How many hours have you wasted? How much money do you stand to lose?

Don’t get caught without a plan, speak with your clients, let them know that the program has ended, discuss additional options, have a back up plan.

Contact one of our loan officers today to discuss options.

Categories: Choosing a Loan, Down Payments, FHA Loans, helpful tips, Semper Updates