Wed, 28 Nov 2012, 4:17am PST
If you assume a 20% down payment then...$20k/20% = $100k. Some people might use the $20k to bring their DP up to 20% on a house that they could already afford, but I assume that most will use it to leverage themselves into a bigger house. Were there stipulations on there somewhere that said something like, "the grant can only be used on loans where the borrower will put 20% or more down when the grant is included"?
Say Joe Blow has $100k in cash saved. He could buy a $500k house with 20% down.
Joe wins a slot in the grant give-away. He now has $120k in cash.
Does Joe use that $120k to put 20% down on a $600k house?
Does Joe use that $120k to put 24% down on a $500k house?
Maybe there is a stipulation in there somewhere. I sort of doubt it. Might be another "trap" sort of like the government house buyer credits. Spend $5 to save $1.
Well, it is a very nice grant if the buyer decides to take the latter option and use the $20k to borrow LESS money overall. I certainly would!