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Repayable home grants X Non-Repayable grants: Which one should
This is a question that I receive often - Easy answer: If all possible, get ‘em both!
The culprit is that, repayable grants will have to be repaid …but worry not because you will not need to pay a penny until you eventually sale your house.
So it is still a cash boost you should not pass up AND it is still oh, so close, to "free money." - Please read more below - that you are going to love what I have for you on this page.
It is small wonder that non-repayable grants are still the grants
like the most!
However – just because it has to be paid “some day” – it is no reason to apply and – if approved – to not accept it.
non-repayable grants are so called because after a certain time [5 to 7 years
they start to phase out – and YOU start to own a percentage of that equity
every year until you own it all. And it is yours – 100%!
Opposite to “repayable” grants – which one day, no matter how long [30, 40, 50 years] funds given to you will have to be returned to the grantor.
How Repayable Home Grants Work
You apply for one of the repayable home grants, you qualify for it and you receive a certain amount – let’s say it is $15,000.
Then you go to the market place and find a home at the price of – as an example - $70,000… And – as an example – you put 5% percent down which is equal to $2,450.
When you add the two amounts you have $17,450 as down payment or 24.92%!
With that you are bound to attract multiple lenders willing to give you a mortgage AND better rates, because – as a rule -- lender aim to have a 20%.
Repayable home grants are given in the form of a “silent” 2nd mortgage.
It is considered “silent” mortgage
a) You do not have to pay interest on it – ever! Sweet, hum!
b) There is no “balloon” [this is a term used when you have to pay a debt at certain time and the “note is called”] – no, one of the features of repayable home grants the “note” will only be called if you sell the property
Nonetheless it does
generate a full blown 2nd mortgage / lien and it will be recorded!
This lien is attached to the title and doesn’t matter how you shake or how long it takes it will resurface at the moment of a sale. And trust me, one day this property will eventually be sold.
However, for now, just treat it as it were a loan extended to you, with no interest and which does not need to be paid as long as you live in the property …and you are alive… What a sweet deal!
Please do not shy away from repayable home grants: After all they are interest free and payment deferred loans. Tell me if that is not cooler the sliced bread!
Please let your heirs know that there will be consequences on the transfer of ownership and they possibly will have to make arrangement with the grantor.
While you live in the home though, enjoy it and do not loose sleep over it. I wouldn’t!
Do Not Forget It On The Long Run
I think that you should be more cautious with repayable home grants for the
Not because there is anything wrong with the kind of grant, but because you should not to forget in the eventuality of selling the property…
Or – because of my real estate training, I have to think about it: At the time of your passing… : -(
I am here wishing you a very long and productive life! However I am quite sure that you would know, as much as I do, the two things that are for certain in life: Taxes… and, eventually, “we all will be called home.”
As time goes by, people tend to forget how it “did really happen.”
As you are dealing with government entities, rest assured: They will over last you. And in case you forget, someone “sitting behind the desk” will be there to raise a flag that you signed a document to return the funds granted to you to buy your home. As a matter of fact it will be in your property title and it cannot be transferred to anybody else until that obligation can be satisfied [paid].
I have asked the mortgage officer working for one of my clients what will happen then [at the owner’s passing]… I got no satisfactory answers…
So, now that you are aware that grants can be a repayable home grants or “Non-repayable home grants" – please make good notes about that information and somehow keep it safely along your new home docs - in order not be caught off guard if and when you come to sell the property.
Repayable grants have many [most] features that other grants do -- you have to show to be responsible with your finances by:
- by showing a mid credit score of 620 or higher
- Most likely you will be required to attend a class on ownership and finance responsibility
- Pay 3 to 5% of the purchase price out of your pocket at closing
Other credit worthiness may be required like source of income, job etc…
Grants Can Be Combined
Grants can be attained in many levels: Federal, State, local [county or city] and private organizations. Sometimes the grant is for a very small area.
They have the public they want to serve and you do not fit, you would not qualify for that grant… Sometimes you may not qualify because you do not earn enough… sometime they will disqualify you because you "make too much money" [a few hundred dollars can make the difference – in either direction]
Another important thing:
Grants are local. You cannot transfer it outside those boundaries. Example: A
grant from NY can not be transferred to apply for a property in NJ.
However if you fit in the target population, you can combine them with not problem! That’s why I always recommend my folks to go around and ask questions – the worse case scenario they will say “no” …in which case you just move to next agency and try again!
There a whole more info on page "Grants Examples" - please click
Grant Agencies Across The Nation
I have written through this “grant series” that Grants are local.
There are many home buying grants in all 50 states, Puerto Rico and all the territories.
You need to look, ask research! On your own AND right there where you are! Call your local real estate agents that understand the process …or are willing to learn. Contact your county’s housing affairs office. Ask at your place of worship if anyone knows about it. Call your elected officials – so many place to get started and get help and information!I give you a good head start providing you this series of article with some of the most complete information anywhere else in the web – to find information where to apply for your repayable home grants – as well as other non-repayable grants across the Nation, please click here
Deferred Payment And No Interest (Paid OR Accrued!)
If you hold the property bought with the assistance of a repayable home grant to the rest of your days – you will never have to pay the principal and there is no interest to be paid: Never! Not a penny!
eventually the property is sold, you will only owe the same amount of the
principal as the day you received it… even if takes 30 years!
No Instant Windfall …To Burn
The repayable grants – as much as the non-repayable ones - Home buying grants – are given to low income folks who have shown to have responsibility with their finances but are still in need of little push so they can go over the hump of “home ownership”
However most [if not all]
home grants will require that you also put some money of your pocket as well –
to make sure that you do have vested interest in the home you are acquiring. It
simply given to you “for the asking.”
The majority of home grants are funded by government which is to say “tax payer money” and it has to be protect at all cost at all times.
The grants are “real money” that is paid at closing – on your behalf!
That money is a guarantee to your main lender – yes, grants do not pay everything! – that somebody is vouching for you at this point in time.
But please do not think – and by all means please do no let yourself be influenced by people around who may not understand the process – that it is “instant” cash that you can go out and blow it out!
No, it is not!
Grants are like a co-signer [up to the amount – typically between 5 to 30 % of the home purchase price] – so it makes possible for you to qualify for the rest of the loan! :- )
Please do not think you it can cashed via HELOC [home equity line of credit] or flip [re-selling your home in a short period of time after purchase]
This money is paid in your behalf because you have proved you are responsible with your finances AND it is assumed you need a home …for the long haul!
Repayable grants – as any other grant – are not “instant windfall to blow.” It is given to those who nee a “boost” so they go over the hump and achieve the dream of homeownership and stay in a neighborhood for the long haul NOT for those who are looking for a quick buck.
This is but one of the home grants knowledge filled pages I have posted on my site! Please follow the links below to learn more about my other valuable additional home grants information:
JC Fagundes, Associate Broker
EQUAL SERVICE TO ALL.
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