Down Payment Assistance Loan (DPAL)
One of the biggest obstacles to owning a home is the amount of funds a borrower must have for downpayment and closing costs. To help applicants overcome this obstacle, SONYMA offers homebuyers down payment assistance in conjunction with SONYMA financing. Please read below for details about the Down Payment Assistance Loan (DPAL) offered by SONYMA.
Down Payment Assistance Loan (DPAL) allows SONYMA borrowers to secure down payment assistance through a second mortgage that can be used in combination with any currently available SONYMA program. DPALs have no interest rate and no monthly payments and will be forgiven after ten (10) years as long as the borrower keeps the SONYMA financing in place, and continues to owner occupy his or her home.
The SONYMA DPAL can now be used to pay all or a portion of a one-time mortgage insurance premium, if applicable, thus significantly reducing your monthly mortgage payment.
- 0% interest rate;
- Requires no monthly payments and is forgiven after 10 years;
- Minimum loan is $1,000;
- Maximum loan is the higher of:
- $3,000; or
- 3% of the home purchase price (up to a maximum of $15,000).
The Down Payment Assistance Loan cannot exceed the actual down payment and/or closing costs associated with the mortgage loan transaction; and
- The interest rate for first mortgages associated with a DPAL will be .375% higher than the interest rate for loans without DPAL. (The higher rate does not apply to the Homes for Veterans and Energy Star® Programs.) (click here to see current SONYMA rates).
Additional Considerations for DPAL:
- All or a portion of the Down Payment Assistance Loan may be required to be repaid or “recaptured” if the SONYMA mortgage loan is paid in full within ten (10) years of purchasing the home. The repayment of the Down Payment Assistance Loan will be reduced for each month the applicant lives in the property and the SONYMA mortgage remains outstanding. Further, the amount owed would be eliminated or reduced if the SONYMA financed property is sold and the proceeds are insufficient to cover the amount of the Down Payment Assistance Loan and the applicant’s investment in the property (i.e.: the initial down payment (not covered by DPAL) when the home was purchased plus mortgage loan principal repayments, any closing costs and any capital improvements).
- Regardless of the SONYMA program for which you apply, borrowers must make a minimum cash contribution of one percent (1%) of the value of the property (three percent (3%) for cooperatives, 3- and 4-family properties);
- The above down payment assistance products may only be used in conjunction with a SONYMA mortgage and may be used for any property type eligible under the program that SONYMA finances, including cooperatives;
- The DPAL may not exceed the total amount needed for the down payment, closing costs and prepaid expenses (after applying borrower’s minimum contribution). Borrowers CANNOT receive cash back. If at the loan closing, it appears that the borrower would receive cash back, the lender must (a) lower the DPAL amount so there is no cash back, or (b) apply the overage amount to the principal balance of the first mortgage; and
- SONYMA will not allow the DPAL to be subordinated to another mortgage.
Note: Some SONYMA participating lenders may not offer down payment assistance programs. Please check with your lender before applying for financing.