The Truth About Down Payment Assistance Programs and Quincy Real Estate

If you’re thinking about using a government or nonprofit down payment assistance program to purchase a new home you may want to think twice. Since the current market is by far more complex than any other market in history, except maybe the 1990 savings and loans crisis, this may not be the best time for down payment assistance programs. In a normal market without short sales down payment assistance programs may actually help homeowners. Since our current market has so many short sales it’s more difficult to get your offer accepted on Quincy homes and Cambridge homes if you’re using a down payment assistance program.

The problem with the short sales and down payment assistance programs is that the purchase price on these homes is often not decided until very late into price negotiations. Many down payment assistance programs stipulate that COE (close of escrow) must occur during a specific time period or else a lengthly reapplication process is necessary. Since short sales often have an indefinite period of time before they’re approved this makes working with down payment assistance programs more difficult. If you have a good loan officer it’s not impossible to get an offer accepted and closed on a short sale, but many short sale listing real estate agents won’t even present offers that require down payment assistance.

Additionally, those who require assistance in order to purchase a home may find it difficult to come up with extra cash on a short sell if a lender requires more money from the buyer. If short sales are taken out of the equation as potential properties for down payment assistance programs than the prospective purchaser will be seriously limited by their choice of homes. If the potential home buyer who requires down payment assistance is going to purchase a regular home they should make sure that program approval is achieved before submitting a purchase agreement. Many regular home sellers won’t accept down payment assistance programs that are contingent upon approval after an offer has been accepted. What happens if the home owner goes the full length of the application period only to find out that the buyer was denied?

For the REO (Foreclosure) market many down payment assisted loan buyers are finding it difficult to get an offer accepted because of so many all cash offers that many Quincy and Cambridge investors are bringing to the market. When banks look at offers submitted on an REO (Bank Owned Property) they ask themselves which is stronger, an offer that is contingent upon down payment assistance or an all cash offer? Indeed, if you are planning to buy a home with down payment assistance you may have to submit a higher than fair market purchase contract to be competitive with all the all cash offers and regular conventional offers. If you are thinking about telling your real estate agent or loan broker not to mention the fact that you’re using down payment assistance you may want to think twice.

Real estate agents don’t like to be surprised by fourth quarter negotiation surprises. Hiding the fact that a person is using down payment assistance is likely to reflect poorly on the agency making the offer. Remember, many of these agents work together several times through out their career and have a reputation in the community that must be maintained. It’s not really about trying to discriminate against people who require down payment assistance than it is about finding the right person for the right home in our very complex housing market. Despite Difficulty purchasing a home with down payment assistance, many down payment assistance programs lure prospective home buyers in by promising huge amounts of down payment assistance, which is actually stipulated upon buying a more expensive home.

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