About DPA silent second mortgages
For home buyers considering a silent second-mortgage/DPA loan, first contact your local HUD-approved housing agency to see if programs are offered in your area and whether you meet eligibility requirements of income, occupation, and credit. Programs vary from state to state, so it’s difficult to offer a specific example in terms of the exact house price and down payment you can get. But there are a few general points to keep in mind:
How much you can borrow: DPA programs typically offer silent second mortgages from $1,000 up to a maximum of 20% of the property purchase price, although borrowers may qualify for a larger grant if the city or state allows it.
Interest rates: Rates for DPAs are usually lower than the market rate for mortgages, and don’t compound like a regular mortgage. For example, for a $50,000 loan with a 3% rate, the interest for the year would be $1,500 ($50,000 x 3%), which is added to the loan every year. If you kept the loan for 10 years (the typical term), the total interest would be $15,000.
Repayment: DPA is a loan—not a gift—because it has to be paid back, including accrued interest—but not until the home is sold, vacated, or the original mortgage is refinanced.
Remember, there are many avenues for prospective home buyers with insufficient assets. You'll want to speak with a trusted, knowledgeable loan officer. We at the DiPeso Group recommend Vicki Kammer of Mortgage Network. Contact her here.
courtesy of realtor.com