Do you want to buy a home, but you're worried you don't have enough for the down payment? You’re in good company. Numerous studies, including this 2016 Trulia survey, found that most American households consider the down payment to be the largest obstacle preventing them from buying a home.
For this blog post, we want to focus on a valuable savings resource for home buying hopefuls—matched savings programs.
Matched savings programs, formally known as Individual Development Account (IDA) programs, are defined by the Corporation for Enterprise Development (CFED) as special savings accounts that match the savings deposited by the account holder. The amount of matching funds varies by program, but programs generally provide a dollar for dollar match, or more, depending on the program’s guidelines and funding source.
How IDA Programs Work
IDA programs are typically offered by local nonprofit or government entities in partnership with financial institutions. The nonprofit or government entity recruits and enrolls the participating households, while the financial institution handles the deposits and withdrawals. To qualify, interested participants must undergo financial education and/or one-on-one financial counseling and must meet certain income, asset, and credit requirements, which can vary by program.
Savings and matching funds deposited into a matched savings account can typically be used for three activities:
- To purchase a home
- To start a small business
- Higher education or job training
Eligible expenses can differ depending on the program, so make sure you understand each program’s specific requirements before enrolling. Account holders can also withdraw funding all at once (common if using the funds for a down payment) or over a period of time.
Click here to read CFED's fact sheet on IDA programs.
Using IDA Programs with Down Payment Assistance Programs
Some IDAs can be used with down payment assistance programs like TSAHC’s, which can make buying a home even more affordable. However, there are some IDA programs that require participants to work with specific lenders, so make sure you read all program guidelines carefully if you are interested in combining your IDA account funds with a down payment assistance program.
Want to know more? Click here to find an IDA program in your area.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.