Mortgage Assistance Grants

Mortgage assistance grants can provide home buying assistance. Grants are not free money, so be sure to read the fine print.

Grants are available for many types of home loans.

A grant is money that is paid to someone based on their ability to fit a certain qualification. In the case of a mortgage grant, a homebuyer is required to meet certain guidelines and restrictions.

Historically, many mortgage lenders and private money brokers offered mortgage grants to potential homebuyers. They offered the grants as a way to encourage lower income individuals to consider homeownership. The grants were usually designed to provide down payment assistance for first-time homebuyers. Some programs were offered directly by the lender and some were offered by nonprofit credit counseling agencies. These seller-funded down payment grants were discontinued in late 2008 but grants from government-sponsored programs are still available.

Local and federal governments, as well as some nonprofit organizations, offer mortgage assistance to homeowners. Each program has specific qualifications and restrictions.

The Public Housing Agency (PHA) in a city might offer special mortgage assistance programs to low income residents. Some cities offer a homeownership voucher program which is designed to assist homeowners in paying all or part of their monthly mortgage. In some cities the vouchers may also be provided for use with other homeownership expenses.

The cost of the vouchers is born by the city budgets with additional assistance from the United States Department of Housing and Urban Development (HUD). The amount of funds available varies from year to year. Applicants for vouchers often have to wait several months - or several years - until their application is approved and the funds are available. A call to a participating PHA can get you details of their program including the length of their waiting list.

Federal mortgage assistance grants are made available through HUD but the grants are not paid directly to the homeowner. Instead, HUD makes the programs available to local governments and non-profit organizations. The programs are designed to offer housing opportunities to special groups of homebuyers. For example, in recent years, HUD has offered grants for local home buying programs such as:

• Housing Opportunities for Persons with AIDS
• Self-Help Homeownership Opportunity Program

In general, the HUD grants are typically down payment programs for low income families. Some programs are designed to provide housing assistance to city workers, such as teachers as well as police and fire personnel. Some cities may have as many as four or five different programs available. Cities receive the funds to be dispersed within a specific period of time.

These grants can be structured in a variety of ways. The grant might be structured as a down payment program in which the qualified homebuyer can purchase a home with no down payment or a greatly reduced down payment. The amount of the grant might not be added to the homeowner's monthly payment and there might not be any interest charged on the grant money which is received. Instead the amount of the grant is established as a second mortgage on the home. This second mortgage is paid back when the home is sold or it may be designed to be forgiven by the government after a specific period of time such as fifteen years. This type of grant is often referred to as a "Silent Second."

To qualify for Federal mortgage grants you need to meet specific qualifications which have been established for the grant such as:

• Income requirements for your geographic area
• Approved mortgage loan
• First time home buyer or not have owned a home in the past three years
• No tax liens
• No former foreclosures
• No bankruptcy in the past two years

Be sure that you research the details on the various mortgage assistance grants which are available in your area. Know what you are agreeing to before you sign the contract and before you receive the money. Buying a home is a large purchase on which you will make payments for many years. If you don't understand every detail of the grant, be sure to ask an attorney to review the documentation. You can usually find a free to low cost attorney to review the documents by calling your local legal aid society.

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