Coming up with a down payment for a home can be difficult! Here's is a trick most people don't know about how to get down payment assistance without the higher rate of normal down payment assistance loans.

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Today, we're talking about a down payment assistance trick that most people don't know. So I've done a lot of FHA loans and I didn't know about this until a couple of weeks ago. So we're going to talk about how you can use down payment assistance in a nontraditional way to avoid a lot of the costs and fees that come with regular down payment assistance.
So first of all, down payment assistance is exactly what it sounds like it's assistance to help with your down payment, and a down payment usually can be a big struggle in entering into homeownership. Now down payment assistance is normally given by a local housing authority. All right. And that local housing authority is basically going to give you a grant or a loan.
But the problem with that is is there's normally some costs, extra costs involved. So even though you're getting assistance with the down payment, there are added fees to it, you also normally have a higher rate. So, let's say you get an FHA loan right now for 3%. With a down payment assistance program that might be closer to 4.5%.
So you're paying a lot of extra money to get that down payment assistance. And also you maybe have a certain period of years that you have to remain in the property. Some down payment assistance requires you to be inhome and not sell it or refinance for 5 to 10 years. So that can really prevent you from saving a lot of money if interest rates drop down even further.
So when you don't have access to a down payment assistance program you might be looking at something as a gift from a family member. And most people are really familiar with getting a gift for closing costs. But here's the thing that a lot of people don't know: you can actually get a loan for your down payment, from a family member.
Okay. Most people don't know this. If you talk to a loan officer, they probably don't think that this is a thing that you can do. So it can be unsecured or secured against the property as a second mortgage. So, effectively what a family member can do for you is they can give you a second mortgage for your down payment.
This is huge because this is down payment assistance, but it doesn't have all of the downsides of regular down payment assistance. So you don't have to pay any extra fees to a family member in this, unless they're going to charge that to you, which would kind of suck, but, no extra fees, no increased rate on that, and you don't have a limit on when you can refinance. So that a family member gets to decide what the terms of this new loan looks like. So they could choose to charge interest. They could choose to not charge interest. They could choose, you know, maybe just one upfront cost really depends on what they want to do.
Right. They could also secure it against your current home. So when you sell the property, they would get that money back. If it's unsecured, then you don't have to pay that money back when you sell the property, you just have to pay it back according to the terms that they give you. So this is huge because you don't have to go through normal down payment assistance as long as you have a family member, who's willing to give you that loan. Also something interesting, and you'll learn through as you're exploring these different types of loans, you know, the whole mortgage world is, is weird. It has a bunch of random rules about things, FHA has this thing called MRI.
It's the minimum required investment. FHA basically says, hey, no matter how, the money that you bring to the closing table, no matter how much or how little it is, you always have to have 3.5% minimum of the downpayment sitting in your bank account. Okay. So even if your total cash to close is lower than 3.5%, you still have to have that money sitting in your bank account so that they can see you have a minimum required investment.
It's a dumb rule.


0:00 Down payment assistance trick
0:33 How down payment assistance normally works
0:54 Downsides of normal DPA loans
1:34 More options than a gift
1:45 The trick
6:16 CalmMoment
7:54 Who counts as family?
9:14 10 FHA loan down payment tips and tricks

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Kyle Seagraves
NMLS# 1701021
Motto Mortgage Alliance
8900 N. Dixie Dr.
Dayton, OH 45414
Equal Housing Opportunity