Assistance Programs
There a wide range of programs designed to help lower income home buyers, or home buyers with very limited cash, buy a home. Some programs are available nationwide or statewide, others are restricted to home purchases within particular a city or county. If you don't find the information you need here, give a call to your local housing department or check out their web site.
Don't assume that you're not eligible for home buyer assistance programs. Find out. Many programs indicate that they're for first time home buyers, but a "first time" home buyer for most of these programs is anyone who hasn't owned a home in the past 3 years. And while most are designed to assist lower income buyers, this generally means that the buyer has an income which is less than 80% of the local median income. In a market like Boulder, you can make a lot of money and still qualify for these programs. And some programs have no income restrictions. Donald Trump could qualify.
In the Boulder County real estate market, we deal with four different types of assistance programs:
- City or County Lower Income Housing
- State of Colorado Low Interest Rate Loans
- City and County Down Payment Assistance Programs
- Private "Seller Financed" Cash Assistance Programs
City or County Lower Income Housing Programs
In order to maintain a diverse population and to assist lower income buyers, many of the communities in the area offer programs designed to make it possible for lower income buyers to purchase homes. Often, as a condition for issuing builder permits to developers, builders must sell a certain percentage of the homes they build to lower income buyers at below market prices. Often, the property purchased will have a deed restriction which requires that when the property is sold, it is sold to another qualified lower income buyer. The deed restriction may also limit the amount that the property can sell for. These programs are complex and their terms and requirements are constantly in flux. They generally require that you attend classes on home ownership and financial management. You can obtain more extensive and more current information on these programs at:
State of Colorado Low Interest Rate Loans
Through CHFA, Colorado offers mortgage loans at below market rates as well as deferred loans to help buyers with the cash for the down payment and closing costs. CHAC provides down payment assistance.
City or County Down Payment Assistance Programs
Both the city of Boulder and Boulder County offer down payment assistance programs.
Private "Seller Financed" Cash Assistance Programs
State and city down payment and cash assistance programs either provide an actual gift or a deferred loan that provides the cash the buyer needs to purchase a home. These are wonderful programs if you qualify for them, although they usually require that you attend classes on home buying and financial management. They also put limits and controls on what you can buy and how you can buy it that can be frustrating and even damaging to the buyer.
In addition to these publicly funded programs, there are private, seller-financed, "assistance" programs that typically impose no limits or restrictions, because the are -- to put it negatively -- nothing more than "money laundering" operations that allow the seller to give cash to the buyer for down payment and closing costs. Lenders don't generally allow sellers to give buyers the cash they need for the down payment and closing cost. They do allow gives from certain other entities including family members and qualifying nonprofit agencies. The companies below are using this "loophole" -- with the mortgage lenders' knowledge -- to transfer money from the seller to the buyer.
Here's how it works: Imagine we have a buyer who is qualified for a loan but needs $8,000 to purchase a $200,000 home. If we can find a seller who owns a $200,000 home, but is willing to take $190,000 for it, we make a purchase offer for $198,700 and ask the seller to make an $8,700 contribution to one of these non-profit agencies. That agency retains $300-700 of this amount for their services and then gifts the remainder to the buyer to facilitate the purchase of the home. Clearly odd, but it provides a wonderful option for many, many buyers.
And if you have the $8,000 you need, but want to keep that cash in the bank so that you can remodel the bathrooms after closing. No problem. Keep your cash in the bank and let the seller gift you the $8,000 you need to close.
