Denver down payment assistance works by combining an eligible first mortgage with financial assistance that helps cover a homebuyer’s down payment, closing costs or other approved expenses. Depending on the program, the assistance may be provided as a grant, deferred-payment loan or second mortgage.
These programs can be valuable for prospective homeowners who have sufficient income to afford monthly mortgage payments but have not saved enough to cover all their initial homebuying expenses.
What Does Down Payment Assistance Cover?
The allowable uses depend on the program. Assistance may be applied toward:
- The required down payment
- Mortgage closing costs
- Prepaid property taxes
- Homeowners insurance
- Other eligible prepaid expenses
The assistance is generally not provided as cash directly to the buyer. Instead, it is incorporated into the closing transaction and applied toward approved costs.
Does the Assistance Have to Be Repaid?
Some programs offer grants that do not require repayment when the borrower satisfies all program conditions. Other programs provide a deferred-payment loan without a regular monthly payment.
Deferred assistance may become repayable when the homeowner sells the property, refinances the first mortgage, transfers ownership, moves out or pays off the original home loan. Buyers should understand these requirements before selecting a program.
The City and County of Denver sponsors metroDPA, which offers qualifying borrowers a home loan and assistance for down payments, closing costs and prepaid expenses. The program currently does not charge monthly payments or interest on its assistance, but the amount must generally be repaid when the first mortgage is repaid. Eligibility requirements and program terms can change.
Who Qualifies for Denver Down Payment Assistance?
Qualification requirements vary, but programs commonly evaluate:
- Household income
- Credit score and payment history
- Debt-to-income ratio
- Property location
- Home purchase price
- Occupancy of the property
- Selected first-mortgage program
Some programs require buyers to complete an approved homebuyer education course. This course can help applicants understand mortgage payments, closing costs, property taxes, insurance and the responsibilities of homeownership.
Must You Be a First-Time Homebuyer?
Not every Denver down payment assistance program is limited to first-time buyers. Furthermore, first-time homebuyer does not always mean someone who has never owned a house.
Some programs consider applicants first-time buyers when they have not owned a principal residence during the preceding three years. Repeat buyers may qualify under programs that do not impose a first-time ownership requirement.
How Do You Apply?
Begin by contacting a lender approved to participate in the program you are considering. The lender will review your income, assets, credit, debts and expected housing expenses.
Request a complete written estimate showing:
- Mortgage interest rate and APR
- Estimated monthly payment
- Required cash at closing
- Mortgage insurance expenses
- Assistance repayment conditions
- Estimated closing costs
Denver down payment assistance can reduce the amount needed to purchase a home, but it does not make an unaffordable property affordable. Compare the complete monthly payment and long-term financing costs before making a decision.
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