Can you stack a $0 down mortgage program with local down payment assistance AND a teacher program? That's the question I got recently from a first-time buyer in Florida. He's a teacher, drowning in credit card debt, paying $1,400 a month for a tiny one-bedroom apartment with no roommate to split it with. He wanted to know if he had any shot at ownership, or if he just needs to wait 10+ years to save the $15,000 to $20,000 it would take for a down payment.

Good question. Let's break down how these programs actually work together, because most people assume you can stack everything and that's just not true.

Can you stack these programs? Mostly, no.

Here's what stacks easiest: a grant.

Grants don't require repayment, so they don't need to sit in a lien position (who gets repaid first if the home is sold).

Let me explain with an example. Say you're buying a home for $100k (I know, not many homes are that price anymore, but it makes the math easy).

If you need 3% down, that's $3,000 for the down payment, and your first mortgage would be $97,000.

Down payment assistance programs give you that $3,000 one of two ways: a grant, or a loan.

Loans come in three flavors:

  • Repayable (you pay it back monthly with interest)
  • Repayable, payment deferred (no monthly payments, but you pay it back when you sell, refinance, or move out)
  • Forgivable (the loan gets forgiven if you meet certain conditions, most commonly keeping the home as your primary residence for a set number of years)

When you use these programs, they want a specific lien position. If you sell the property, lien position determines who gets paid first:

  1. First mortgage sits in first position: $97,000
  2. Second mortgage (a deferred loan) sits in second position: $3,000
  3. If a third program is okay sitting in third position, it goes here

Look at that stack. The house is worth $100k and you owe $100k. Completely maxed out. The more programs you stack, the more upside down you are on the home, meaning you owe more than it's worth.

So every program has to ask: if this buyer had to sell quickly, would we get cut out in a short sale? Would we lose the money we lent?

USDA is the exception

Let's look at Florida's assistance program, called FL Assist. It offers up to $10,000 on FHA, VA, USDA, and Conventional loans as a 0%, non-amortizing, deferred second mortgage. It's not forgivable. You pay it back when you sell, transfer, refinance, pay off the first mortgage, or stop occupying the property.

Here's something you actually can stack: USDA $0 down PLUS Florida Assist.

With a USDA loan, if you buy in a rural eligible area and meet the strict income limits, you can do it with $0 down. Florida Assist then gives you $10,000 to cover closing costs, since you don't need help with the down payment.

Here's how that looks:

  1. $101k owed on the USDA loan (that extra 1% is USDA's guarantee fee)
  2. $10k from FL Assist

You'd owe $111k on a home worth $100k.

Now let's say the seller agrees to cover your closing costs instead. Then it looks like this:

  1. ~$91k owed on the USDA loan
  2. $10k from FL Assist

Most people would think, "if the seller is covering closing costs, why bother with FL Assist?" Fair question. But wouldn't you rather move some of your owed balance onto a 0% loan? That could be a smart move.

Just be sure to compare a couple of lenders' rates on these USDA programs. If a different lender offers a much better rate but without the FL Assist option, it might be worth skipping FL Assist entirely.

One more note: if you're looking at a $0 down portfolio loan offered to first-time buyers (some credit unions offer these), you can't stack it with FL Assist. Why? Because a credit union portfolio loan isn't Conventional, USDA, FHA, or VA.

And here's the real exception on grants: you can stack three programs if one of them is a true grant.

  1. USDA ($0 down program)
  2. FL Assist ($10k at 0%)
  3. A grant

I'm not finding true grants specific to Florida right now, but if one exists that doesn't require a specific lender, you could likely stack it on top of the other two.

$0 down doesn't mean $0 out of pocket

Even if your down payment is fully covered, you'll still have closing costs.

Lucky for Florida buyers, it's a heavy buyer's market in most of the state right now, meaning there are a lot more sellers than buyers. I actually just read that 14% of the nation's homes for sale are in Florida.

When the scale is tipped in the buyer's favor like that, sellers are more likely to offer to cover closing costs. So if your down payment is already covered by a program and the seller covers closing costs, you might walk in with minimal out of pocket. You'll still likely pay for things like the inspection and appraisal upfront.

If you want to see what your specific out of pocket costs might look like, the payment and closing cost calculator can give you a real number to plan around.

All the $0 down programs I can think of

Here's the full list, with a quick explanation of each.

VA

For eligible military veterans.

USDA

For buyers earning within strict income limits, buying in eligible rural areas.

Credit union portfolio loans

Some credit unions offer $0 down loans, sometimes without PMI, for first-time homebuyers. Portfolio loans mean the credit union sets its own rules, not Fannie Mae or Freddie Mac.

Physician loans

Similar to portfolio loans. Banks take a bigger bet on high income professionals to deepen the relationship and cross-sell investment accounts down the road.

Local down payment assistance programs

These vary by state and even by county. If you want a good starting point for what's available where you live, check out this down payment assistance guide covering all 50 states.

National down payment assistance programs

A lot of lenders offer down payment assistance as a repayable loan (with interest) on a 10 to 15 year term. This is accessible to most buyers within certain purchase price limits.

One more thing worth saying

If you're drowning in credit card debt, stacking a mortgage on top of it won't fix things, even if owning sounds financially better than renting long term. It's like having a baby hoping it'll save a struggling relationship. It just adds more pressure.

Work on getting your basic cash in, cash out under control first. You'll be surprised how much quicker you can save once that's handled.

-Sam

Originally shared by u/SamTMortgageBroker in r/NewbHomebuyer — view the original thread.