Home Buyer FAQ

Down Payment Assistance for Homebuyers

What type of loan programs are offered with the assistance?

  • FHA
  • VA
  • Rural Development
  • Fannie Mae HFA Preferred
  • Freddie Mac HFA Advantage

All loans are 30-year, fixed rate mortgages.
Rate/term refinance on any of the above loan products.

How does DPA work?

The down payment assistance is based on a percentage of the total first mortgage loan amount. The amount of assistance is 0%, 3.5%, 4.0%, or 5.0% of total first mortgage loan amount.  The type and percentage of the assistance provided depends upon the first mortgage loan type.

The assistance provided with a Fannie Mae HFA Preferred conventional loan is in the form of a 7-year forgivable second mortgage, which forgives 1/84th each full month the borrower lives in the property after the loan closes.  The borrower can receive 0%, 3.5%, 4.0%, or 5.0% of the total first mortgage loan amount in assistance funds in conjunction with the Fannie Mae HFA Preferred.

The assistance provided with FHA, VA, Rural Development, and Freddie Mac HFA Advantage loan is in the form of a gift that does not have to be repaid.  The borrower can receive 3.5% or 4.0% of the total first mortgage loan amount in assistance funds with FHA, VA, and Rural Development, or 0%, 3.5%, or 4.0% with the Freddie Mac HFA Advantage loan.

The funds may be used to fund up to 100% of the borrower’s cash requirement to close, including the down payment, closing costs, pre-paid items, single or split MI fees and other related mortgage loan fees and expenses.  No portion of the assistance funds can be paid to the borrower unless the borrower is being reimbursed for his/her earnest money deposit and pre-paid expenses to the extent the minimum borrower contribution has been satisfied.  Under the rate/term refinance option, any funds above the amount needed to pay the borrower’s loan related costs must be used to reduce the principal amount of the first mortgage loan.

Do I have to pay back any portion of the down payment assistance?

If you receive assistance in conjunction with an FHA, VA, Rural Development, or Freddie Mac HFA Advantage loan, the assistance is in the form of a gift and you will not have to pay back any portion of the assistance.

If you receive assistance in conjunction with a Fannie Mae HFA Preferred loan, the assistance is in the form of a 7-year forgivable second mortgage.  The second mortgage loan principal will be forgiven 1/84th each month, beginning with the first full month after closing.  There is no forgiveness for partial months.  The outstanding principal of the second mortgage loan will be due and payable in any of the following instances that occur before the end of the 7-year forgiveness period:

  • The sale, disposition, or transfer of the property
  • The refinancing or payment in full of the first mortgage loan
  • Failure to occupy the property as principal residence for a period of more than sixty (60) days
  • Upon acceleration of the first mortgage loan or second mortgage loan for any reason

Am I required to stay in the home for any minimum number of years?

If you receive assistance in conjunction with an FHA, VA, Rural Development, or Freddie Mac HFA Advantage loan, the assistance is in the form of a gift and you will not be required to stay in the home a minimum number of years.

If you receive assistance in conjunction with a Fannie Mae HFA Preferred loan, the assistance is in the form of a 7-year forgivable second mortgage.  The second mortgage loan principal will be forgiven 1/84th each month, beginning with the first full month after closing.  There is no forgiveness for partial months.  The outstanding principal of the second mortgage loan will be due and payable in any of the following instances that occur before the end of the 7-year forgiveness period:

  • The sale, disposition, or transfer of the property
  • The refinancing or payment in full of the first mortgage loan
  • Failure to occupy the property as principal residence for a period of more than sixty (60) days
  • Upon acceleration of the first mortgage loan or second mortgage loan for any reason

What are the first mortgage interest rates?

The interest rates for the REI Home100 Program are set daily.  For more information  about interest rates on a specific day, please contact a participating mortgage lender by visiting our Find A Lender page for Borrowers.

Please note that as a result of the assistance, the interest rate on the first mortgage loan will be higher than a first mortgage loan that does not include the assistance.

What is the minimum credit score?

All borrowers MUST have a minimum representative Credit Score of 640 with a maximum DTI of 45%.

What is DTI?

DTI stands for debt-to-income ratio, also referred to as back-end ratio.  It shows how much of your gross monthly income is needed to cover all your debt obligations.  Follow these steps to determine your approximate DTI:

  • Add up all of your monthly debt payments (including your mortgage, car loans, child support and alimony, credit cards, student loans, etc.)
  • Divide this amount by your gross monthly income.
  • Then multiply this amount by 100. This percentage is your DTI.

Please keep in mind that you must meet specific underwriting standards.  The participating mortgage lender can help you better understand FICO credit score and maximum back-end ratio requirements, as well as any other standards that may apply.

Do I have to be a first-time homebuyer?

No, there is no first-time home buyer requirement.

Are there income restrictions?

The borrower’s qualifying income must not exceed Program Income Limits.  Click these links to view Government Income Limits (FHA, VA, and Rural Development loans), Fannie Mae Income Limits, or Freddie Mac Income Limits.

Does the borrower have to take a home buyer education class?

FHA, VA, & Rural Development Loans:  Home buyer education is recommended, but not required.

Fannie Mae HFA Preferred and Freddie Mac HFA Advantage:  Required if all borrowers are first-time home buyers, at least one borrower must complete pre-purchase home buyer education and counseling.  The online course listed below is an acceptable course as is an on-line MI company, and/or an OHEA Certified or HUD certified counselors.

When borrowers have successfully completed the course, a Certificate of Completion will be available to print.

Register At www.ehomeamerica.org/reiok

Can the Seller help me pay closing costs?

Government Programs (FHA, VA, & Rural Development):

  • Yes, 6% seller concessions are allowed.

Fannie Mae HFA Preferred & Freddie Mac HFA Advantage:

  • Yes, 3% maximum for CLTV greater than 90%
  • 6% maximum for CLTV less than or equal to 90%.

May be used for closing costs and/or single or split MI premiums

What is the difference between closing costs and required down payment?

Closing costs are fees associated with the cost of obtaining a home loan. These fees include items such as the appraisal, lender origination fees, escrow handling charges, wire transfer fees, discount points, lender’s title insurance and prepaid taxes and insurance premiums.

The down payment for a home is applied directly toward lowering your total loan amount.  Normally based on a percentage of the total sales price, the amount is established by the agency loan program that the lender has chosen for your loan.

How long does the process take?

Lenders should be able to close a loan in the same amount of time it takes to close a traditional mortgage loan.

Can I receive assistance for investment property or a second home?

No, the borrower must utilize the assistance on their primary residence.

How do I apply for the assistance?

Take a look at the 10 Steps to Homeownership and contact one of our Participating Lenders.

How do I find a lender?

Click here to access lender list.  You may use the REI Home100 approved lender of your choice. If you are using a lender that is not familiar with the program or is not approved, please have them contact Dena Sherrill, REI Director of Housing at 800-658-2823 or dsherrill@reiok.org.