Project Main Details
Through federal grants, the city’s Down Payment assistance loan program offers 0 percent interest-deferred, shared-equity, gap-financing loans of up to 30 percent of the sales price, with a maximum of $49,999.
Wow, that’s’ enough to make your eyes cross.
But it’s really not that confusing. Let’s break it down.
The Down Payment Assistance loan program bridges the gap between the total cost to buy the home including closing costs and the sum of all other financing.
Here’s an example –
You go to a lender and they are willing to lend you $120,000.
You find a $150,000 house.
It costs money to borrow money, so let’s say you need to pay $8,000 in closing costs, which includes insurance, taxes and fees.
The Down Payment Assistance Loan program requires you to put 1 ½ percent of the sales price of your own money into the deal. With a sales price of $150,000, that would be $2,250.
The total cost of the house comes to $158,000.
The financing from your lender and your own funds is $122,250.
There’s a $35,750 gap you need to fill.
The program exists to bridge the gap and make the deal work.
Gap financing may be up to 30 percent of the sales price, with a maximum of $49,999.
In the example we looked at, 30 percent of the sales price of $150,000 is $45,500. That’s the highest amount the city would provide in that case.
For a more expensive home of say, $180,000, 30 percent is $54,000. The cap would come into effect here and the most the city would loan you would be $49,999.
How the Down Payment Assistance Loan is paid back?
The loan is 0 percent interest deferred. Meaning that there is no interest for the life of the loan and you pay nothing back until you stop living in the house.
SHARED EQUITY -
When you no longer live in the house, you pay back what you borrowed from the city plus a part of the profit you make from selling your home.
If the down payment assistance was 10 percent of the sales price, then you repay what you borrowed plus 10 percent of the profit you make when selling your house.
From our earlier example:
$35,750 is 24 percent of the $150,000 sales price.
Let’s say that after several years you decide to sell your home for $180,000, making $30,000 in profit.
You pay back the $35,750 you borrowed plus 24 percent of your profit, which is $7,200.
$42,950 would go back to the city.
The Down Payment Assistance Program provides an exciting tool to help bridge the gap between you and your home.
For more information, visit our webpage at cstx.gov/downpayment.
You can also give us a call at 979-764-3778.
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