Explaining the Down Payment Assistance Plan or DPA

Down Payment Assistance Plan McKinney TXThe following is a guest post by Propel Tax. Propel Tax serves a resource for customers seeking help with their property taxes and property tax loans in Texas.

First time home buyers may have trouble navigating the financing process of purchasing a home. While there are many different techniques for the exact makeup of financing for home purchases, one assistance program that first-time buyers may not be aware of is the Down Payment Assistance DPA plan.

What is a DPA plan?

Down payment assistance is intended to help first-time buyers who are struggling to save enough money to put a down payment on a house. Many potential buyers are able to handle the monthly payments associated with a mortgage, but they have trouble getting enough money together for the down payment and the closing costs that are necessary to complete a home purchase.

The federal government offered this type of assistance to first-time buyers between the years of 2003 and 2008, but the program has been phased out. However, there may be assistance available through state governments and private lenders.


The Benefits of a DPA Plan

As noted above, the biggest benefit of a down payment assistance plan is that it allows first-time buyers to purchase a home when they are struggling to save the hefty 10 percent or greater down payment that is often required to complete a home purchase. People who have the financial means to pay a mortgage are sometimes unable to save money for a down payment because they are currently paying rent.

The Downsides of a DPA Plan

Down payment assistance is considered a loan and will add to how much a homeowner owes for a home purchase. The loan payment may be considered separate from the mortgage and must therefore be paid separately.

These types of plans are generally aimed at assisting people with good or very good credit. Some home buyers assume that down payment assistance is similar to federally-insured loans that are intended to help people with fair credit purchase a home, but there is often a minimum credit score required for a buyer to be eligible for assistance with down payment costs.

Assistance plans that are offered by state governments typically require a family to fall below a certain income threshold to qualify for the loan. Home buyers should seek information related to their specific state to determine whether any income limit applies.

Government-run assistance programs have strict rules regarding the repayment of the loan and maintaining eligibility under the assistance plan. For example, many states will forgive the loan if the family stays in the house and makes all payments associated with living in the home on time and in the full amount due. This includes property taxes. States offering a forgiveness program will not forgive the loan if the homeowner has delinquent property taxes.

Property Tax Loans

Home buyers who have recently purchased a home and find themselves unable to pay their property taxes may be worried about penalties and other consequences related to late and missed tax payments. One option available to people with property tax problems is applying for a property tax loan. This type of loan is used to pay the balance owed on property taxes including any fees that may have been assessed for late payments. Homeowners are then able to make payments on the loan instead of accruing penalties and fees on overdue property tax bills.

Also published on Medium.