FAQ – Minimum Buyer Contribution In A Down Payment Assistance Program

This is a little more complicated than you would expect, but still easily explained. The main thing the understand there is the title. It says Minimum buyer Contribution, not Minimum Buyer Down Payment. This is not a typo and it is an important distinction.

  • Lets say that we have an FHA (3.5% required down payment) loan on a 300,000 Purchase Price which would mean that we are required by FHA to bring in 10,500 dollars Down Payment
  • We will also say that we have also got about 9,000 in closing costs.

We are going to get a Down Payment Program that gives us 70,000 in Down Payment and Closing Cost Assistance.  As stated above we only have 9,500 in Down Payment and 9,000 in closing costs (total of 18,500) and we are getting 70,000 in Down Payment and Closing Cost Assistance.  Thus our DAP program paid the full 18,500 needed and even gave us an extra 51,500 down payment on top of that!  You would guess that we would not need any money to get into the house in this scenario.  In fact you may or may not be correct.  Many times DAP programs insist that the buyer put some “Skin In The Game”.  They want the buyer to put at least a little cash into the transaction so that the buyer has a vested interest in the property.  In these cases they may say that the buyer needs to put at least

  • “x%” contribution into the transaction as a Down Payment.
  • “x% contribution into the transaction in closing costs.
  • “x%” contribution into the transaction in any approved Down Payment or closing costs.  In this case they are saying that for the most part they don’t care what the money goes for as long as it was used to buy the house (they will have some restrictions on the way the money is used though).

In any of these cases the buyer may have met the minimum requirement of the First Mortgage through the DAP, but the DAP imposed a new requirement that required the buyer to contribute some funds in the transaction.  You should make sure to read Down Payment And Closing Cost Assistance if you have not already.
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