First-time homebuyers often need help coming up with the money for a downpayment on a home. This is true no matter how well the economy is doing. Many down payment programs exist to help people attain their dream of homeownership. Grants, loans, education, and counseling all play a part in getting people closer to that dream.
It is a generally held belief that increased homeownership adds to the stability of the economy. Homeowners care about their investments, they take pride in their property, and neighborhoods, towns, and cities benefit as a result. Homeownership helps build strong community ties too. For all these reasons, local, state, and federal government programs provide funding for down payment assistance programs. Utah is no exception.
Federal Housing Assistance
The home buying process can be intimidating for first-time homebuyers in Utah. Low- to moderate-income families also face challenges in securing loans. The Federal Housing Authority (FHA) provides monies to fund DPAs across the country. These funds go to smaller organizations and community lenders throughout the state who work with individuals in the process. The DPAs are offered as both grants and low-interest loans. Money is also used to fund one-on-one counseling and homebuyer education.
The Department of Housing and Urban Development (HUD) helps U.S. citizens meet their housing needs. This includes mortgage insurance as well as loans. The department does not provide loans directly to people but they make funds available through a variety of organizations around the country and in Utah. In addition, they offer resources to anyone looking for more information on housing programs including education, counseling, and the American Dream Downpayment Assistance initiative which helps families achieve homeownership.
Down Payment Assistance Programs in Utah
Utah DPA funds are available as loans and grants as they are in other states. A DPA loan serves as a second mortgage on a home. The money is put towards the downpayment and is offered at a low-interest rate with some deferred payment plans as well as loan forgiveness after a certain period. With a deferred payment loan, a homeowner may not be required to make a payment until after the home is sold or the original mortgage is refinanced. This gives the homeowner a chance to build equity in their property without facing an additional financial burden. Some loans are forgiven after a period of five or up to 20 years. This loan type requires the owner to use the property as their primary address. If they move out, sell, or refinance, repayment is required.
A grant is monies given to potential homeowners that they can put towards the down payment or closing costs associated with the primary mortgage. Grants do not require repayment.
Utah offers a variety of grants, loans, and other DPA programs. Each program has certain requirements to qualify. If a community organization is facilitating the loan, the home purchase needs to be within the city, town, or county. Some loans require the applicants to work with specific lenders. Many loans classify a first-time homebuyer as someone who has not owned a home in the past three years. To learn more about the requirements and qualifications of specific loans and grants, contact the individual organization directly.
Utah Down Payment Assistance Programs
The following is a list of Utah down payment assistance programs. Please visit each organization’s website for complete information on eligibility.
Community Development Corporation of Utah
The Community Development Corporation of Utah (CDCU) is a nonprofit organization that builds affordable housing and rehabilitates existing housing stock. Their mission is to revitalize neighborhoods across Utah through services such as homebuyer education and down payment assistance. Their Down Payment Assistance program helps income-eligible, first-time homebuyers. Households receive funds to cover down payments and closing costs. In Salt Lake, DPAs are available for up to $14,000 and up to $10,000 in Salt Lake County and Taylorsville. These are deferred payment loans with no interest and are forgivable after a set period.
To qualify for the DPA program in Salt Lake County and Taylorsville, applicants must have a household income at or below 80 percent of the Area Median Income (AMI). For the SLC Plus program which includes properties within the municipal boundaries of SLC, applicants must have a household income at or below 100 percent of AMI. The property must be owner-occupied and be under contract at the time of application. Additionally, applicants must contribute a minimum of $1,000 of their own money, not gift funds, towards the purchase. Contact the CDCU for more information.
Utah Housing Corporation (UHC)
Utah Housing Corporation (UHC) offers loans for a second mortgage to cover down payment and closing costs. Homebuyers must first qualify for a first mortgage home loan from Utah Housing Corp which is obtained through the FHA, Veterans Association, Fannie Mae, or other approved lender. The loan is a 30-year fixed-rate second mortgage
In addition to regular home loans, Utah Housing Corporation (UHC) offers borrowers the option of getting a second mortgage in order to finance some or all of their down payment and closing costs. This Down Payment Assistance loan is to be used along with an FHA, VA, or Fannie Mae home loan from a UHC participating lender. The minimum for an FHA loan is 3.5 percent of the down payment. Veterans may be eligible for 100 percent financing of the purchase price. A Fannie Mae loan requires the applicant to pay three percent of the down payment.
West Valley City Down Payment Assistance Grant
The DPA offered by West Valley City’s Down Payment Assistance is a grant of up to $14,900 and is available to qualified low- to moderate-income applicants. To receive the grant the applicant must provide $4,000 of their money towards the purchase of which only $2,000 can be gifted. The property must be within the city limits of West Valley City. Eligibility is granted to all existing single-family homes, townhomes, and condos that have had a minimum of one previous owner. New construction homes are not eligible and the home’s purchase price cannot exceed $350,000.
There are also restrictions on front-end housing debt which cannot be over 31 percent of the applicant’s household monthly gross income with the total debt not exceeding 43 percent of the household monthly gross income.
AAA Fair Credit Foundation (FCF) is a nonprofit organization approved by the Department of Housing and Urban Development. They offer services and programs to help both individual home buyers and families get stable housing and long-term financial security. In addition to financial literacy education and counseling, Fair Credit offers Individual Development Accounts (IDAs) to help people save money. The program matches every saved dollar at a rate of up to three to one. The funds may be put towards a first home. Additionally, applicants must be Utah residents 18 years or older with less than $10,000 in assets (not including one house and one car). Other program qualifications also apply which include completion of between six and eight hours of financial training courses, contact with the financial counselor, participation in the program for at least six months with a monthly contribution of at least $15. Funds may not be used to pay down a current mortgage or any other existing debt.