Neuswanger: Down payment challenged? Free money might help (column) – Colorado News

Neuswanger: Down payment challenged? Free money might help (column) – Colorado News

One of the first hurdles a homebuyer faces is the down payment, and in this day and age, that can be a daunting number. Typically, most purchase mortgages require a minimum of 3 percent to 5 percent down. On a $400,000 home purchase that means the borrower must come up with $12,000 to $20,000 down. This leaves many feeling either down payment challenged, or if they can scrape together the money, then they may feel very cash poor once they close on their new place.

Recently, our company aligned with Colorado Housing Finance Authority to offer some homebuyers cash grants for down payment and closing costs. These are not loans; they are grants, and the homebuyer does not have to pay the money back.

There are some limitations on the grant program, and not everyone can qualify. But for those who do, the grant money is tied to your first mortgage amount and can be 4 percent of the balance of the first mortgage. That balance can be (for some) 97 percent of the purchase price. Hence, you can actually get a mortgage and down payment grant money up to about 101 percent of your purchase price with balance toward your closing costs. The borrower must put at least $1,000 of his hard-earned cash into the deal.

This program will not work for everyone, and financially may not always be the best option for those who don’t really need it. The first mortgage loan is also a Colorado Housing Finance Authority loan, and in some cases, those are very competitive with conventional loans, and in some cases, they are not. It takes some serious math work to determine if this is the best option or not. There are many variables.

There is also an option for a zero-interest second…

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