Why do people turn down free money?
It’s a question I’ve asked myself many times over the years I’ve worked for a housing nonprofit.
Most people I meet who qualify for down payment help take advantage of it. But there are always a few sticklers who walk away from a wonderful opportunity.
Why? Is it because they’d rather believe in unicorns than in down payment assistance programs?
Down Payment Assistance Myths
How many of these have you heard?
Myth #1 – You have to be extremely poor to get help.
Many down payment programs are linked to your income.
If you look up the guidelines for income-based programs, you’ll see that you need to be below a certain percentage of your area’s median income (median means that half the people make less than that number and half make more). But that percentage will vary from program to program.
The nonprofit I work with can help families whose income is as high as 120% of the area income, or over $90,000 for a household of four. Since the incomes are based on area averages, if you live in a wealthier area, you can earn more and still qualify.
But some programs aren’t income based at all.
In some cities, major employers will provide down payment help to convince their staff to buy homes near work. And some housing finance agencies provide help to people in certain professions, such as teachers, police officers, and firefighters.
So it’s at least worth making a call before you count yourself out from getting help. And even if your income is too high for you to get down payment help, you may be able to take advantage of home buyer classes that can save you thousands just by making you smarter.
Myth #2 – There are no programs in my area.
It’s amazing how often we miss wonderful things happening right in our backyard.
Sometimes you need to dig a bit to find the programs near you. Here are a few places to check:
- Look up your state’s housing finance agencies.
- While they won’t all have down payment programs, check out HUD housing counselors in your area.
- Search for nonprofit organizations in the NeighborWorks network.
- Google the term “down payment assistance” with the name of your state, county or city.
And don’t forget to ask real estate agents or lenders for their suggestions.
Myth #3 – Down payment programs take too long to get.
A popular matched savings program here in New York state takes at least 10 months. But that’s only one program.
Other programs work more like banks. If you have your paperwork in order, you can get approval for help in less than two weeks.
What’s the lesson?
Start shopping for down payment help long before you start looking at houses. Well before you start looking.
But if you’re already shopping, start looking for potential programs now. Don’t leave money on the table that could be yours.
Myth #4 – Down payment programs are not worth the trouble.
Are you lazy? Or do you really think $20,000 or $30,000 isn’t such a big deal?
If you’re buying a $200,000 house and get a mortgage at 4.25% interest, you’ll spend about $984 for your mortgage alone.
But if you can get $30,000 in down payment help, your payment may go down as low as $836 and save you thousands in interest over the life of your mortgage.
Do you mean to tell me a few hours of your time isn’t worth $150 a month? And that’s not counting the amount you’ll save on mortgage insurance or interest.
Let’s see, that’s $1800 a year. Enough for a nice vacation. Perhaps it will help you to build a new patio for your house. Or start your emergency fund for unexpected repairs.
Don’t Be A Cynic
Why do people believe these myths about down payment programs? I think it’s because they’ve gotten cynical.
If something sounds too good to be true, it’s worth asking, “what’s the catch?”.
But remember that you can benefit from someone else serving their own interests.
First home buyers help the economy. Employers need employees. Cities and towns need tax payers.
Sometimes it’s in someone else’s best interest to help you.
So don’t buy the myths about down payment assistance programs. Check them out for yourself. And don’t leave free money behind.
