Downpayment assistance programs are one of the most overlooked benefits in the homebuyer’s tool box. For many homebuyers, the No. 1 obstacle to buying a house is the downpayment – not the ability to qualify for the monthly payment. With the appropriate downpayment of 5 to 10 percent, many homebuyers could qualify for the purchase of their dream home. Following years of forming creative home financing, governments on all levels and non-profits realized one of the missing elements was the downpayment. Now, more than ever, downpayment assistance programs are readily available to homebuyers.

Sellers competing for buyers can benefit from these programs as well. Neighborhood Gold is such a program that requires the seller’s participation before granting the downpayment funds to the buyer.

NeighborhoodGold.com, reports that “the seller gets full asking price for their home and agrees to pay a seller’s service fee to Neighborhood Gold. The fee equals the grant amount plus 1 percent of the cost of the home (not to exceed $1,000).” The program can be used on any lender program that allows a gift from a non-profit group.

The six-step process in using the program may create problems for buyers in a hot sellers market, however, as the Neighborhood Gold non-profit must be involved in the settlement process – and that slows down the closing process, which may scare some sellers.

If you’re well on your way to saving up for a downpayment but would like some help in making those dollars grow, then you may consider an Individual Development Account.

“Individual Development Accounts are, in essence, 401k plans for low-income families and individuals who probably do not have access to such a savings plan through their employment,” according to IDANetwork.org. IDAs are generally available through non-profit groups, as well as credit unions.

Here’s how they work. The individual or family commits to a set amount of monthly savings over a period of time, one to two years, for instance. Once the future-homebuyers have met their savings goals, the non-profit matches those savings through the IDA program. Section 8 participants interested in homeownership should consider enrolling in a local IDA program. Not every city has an IDA geared towards homeownership. For state by state IDA information, visit www.IDANetwork.org and click State Pages.

Another downpayment assistance program may be as close as your human resources department where you work. More and more employers are implementing employer assistance housing programs to hang on to valued employees.

Fannie Mae has a great online brochure at its site: www.efanniemae.com about how an EAH program works, but the brochure is pretty well hidden from the front page. Punch in efanniemae.com, click Single Family under the Affordable Housing and Community Development section, then click Employer Assisted Housing under Initiatives and Partnerships. If your employer doesn’t have an EAH program, this brochure can direct them on how to get one established.

Probably the leader of the pack in downpayment assistance programs is The Nehemiah Program ( www.getdownpayment.com or call toll free 877-NEHEMIAH.) This program provides grants to homebuyers from 1 percent to 6 percent of the selling price of the home. Since 1997, the program has funded more than 120,000 grants to families seeking homeownership.

These are just a small example of what’s available in the area of downpayment assistance programs – and not all of the programs out there have income limits. Many of these programs are administered on the local and state level. Visit your favorite search engine and plug in “downpayment assistance” and then the state name for regional programs.

Published: October 18, 2002

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Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony’s blog: commonsenserealestate.blogspot.com.