Published on Sep 21, 2025
Welcome to another Q&A session where I answer questions from you all on the internet.
Today's question is:
What's the deal with down payment assistance? Why don't people just get their loans with down payment assistance all the time? Here's the true story. Nothing in this world is free, and that's what I advise my clients when looking into down payment assistance. Now, that said, down payment assistance is not bad.
It's actually a really good thing if you really, really need it. But if you are actually having the ability to bring in your down payment, it's way better. Here's a reason why. When you get a down payment assistance, there's two ways that they will normally give that to you.
That is in the form of a second loan with a small interest payment that's usually about 2% higher than the normal rate, okay? Um, or you get it through the state, where the state won't have a payment, but what they'll do is, is they will apply a higher rate, and on top of that, they will charge a fee, and then the...
I think the biggest thing is the fact that, um, it makes it a lot harder to refinance. Because when you refinance, your house have to have enough equity to cover that down payment assistance, um, loan amount, which could be 12,000, 17,000, 21,000, depending on how much the purchase price is.
They will, they would, uh, give you that down payment assistance. So, if you're looking to get a down payment assistance, again, they're not bad, they're great only if you really need it. If you don't, save yourself the headache. Get a traditional loan, bring in your down payment. A down payment can be as low as 3% or 3.5% if you go with a government loan.
If you have any questions, give us a call.
Don't use down payment assistance if you can afford a 3% down payment. It makes your mortgage harder to refinance and your interest rate may be higher as well.