There are laws and rules and regulations on many levels regarding WHAT a Seller can "give" a Buyer - and Sellers are not allowed to give home buyers downpayment funds. That's where the charities saw an opportunity and the gift assistance programs stepped in, providing a "work around" of those laws.
EXAMPLE: Jane and her dog Spot find a $100,000 home in the Raleigh market. Jane qualifies for the home but does not have the $3,000 needed for an FHA loan. Jane could get a gift from family - OR the SELLER can contribute that $3000 through a DAP. The seller would be paying the money to a CHARITY (the most common are Nehemia, Partners in Charity and AmeriDream) PLUS they will be paying the Charity a "fee / charge" for handling the transaction. When Jane and Spot go to close on the home, the downpayment funds are wired from the gift assistance program (Charity) to the closing agent. The seller has no part in the transfer of funds.
If you are the agent helping Jane and Spot Purchase this home... there are a few extra forms you need to have signed and presented to the mortgage company. In NC you will need the Amendatory Language signed by all parties. Nehemia (and other programs) have additional documents that will need to be completed, along with a Gift Letter. The contract also needs to specifically state that the seller is participating in the DAP program. Because these contract documents must be precise, timely and it is somewhat complicated... Jane and Spot DEFINITELY want to represented by a Real Estate Professional!
If you have additional questions about FHA loans, and how you might be able to use Dubbya's Rebate to buy a home, Steve and Eleanor Thorne, Your Cary Professionals!
Donna! Great Point and another reason why
Jane and Spot need a Real Estate Agent!
The majority of first time home buyers in my area (upstate NY) use down payment assistant programs. Usually seller concessions will be written in the contract, not to exceed 6% of the purchase price, and a Nehemiah, Ameridream or His Kingdom gift will be used. Sometimes it gets tricky explaining how this works to the buyer and seller and you have to be careful. But if you know what you are doing and how to write it into the contract these programs are great for your buyers.
I have never had any appraisal issues with a contract that was written over the purchase price amount but it can happen if there is not enough value in the home.
Amy! Many of the FHA loans in our area are also written with DAPs.
The only problem I've seen has been when the Seller wanted to increase the
Sales Price by the 6%... We are in an appreciateing market
so some sellers want full price... Another great reason for Jane and Spot
to work with a Professional Real Estate Agent!
Naoma and Don! Thanks for coming by!
These are tricky - and that's why Jane and Spot
need to work with a Professional Real Estate Agent!
JOE! I knew you would understand
the position Jane and Spot are in! LOL!
I figure you can't see the glass of wine
Jane has in her other hand...
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WOW! That's a huge ad!
I've never seen something like that!
I don't think Jane and Spot would go for it....
Because I own a title insurance company too!
(and we're an attorney state)
But thanks for stoppin' by!
Eleanor - looks like you've had some very interesting traffic.
Great information on DAP programs. Wasn't aware of the charitable organizations, but sounds like this could be a growing segment with loan requirements changing.
Penny! Yep we've been having some fun with this.
But as you can see from the comments...
it's a great program - but not all sellers
that can or will discount the house enough
so that it still appraises
and they are paying 3 to 4%
(with fees to the charity and maybe paying for attorney fee).
Would work GREAT for your homes in
Chatham County
Save Ameridream and other Down Payment Assistance programs
If you haven't done so, go to this website, http://www.rallyforhomeownership.org/
It only takes 30 seconds. This form will go to your local Congressmen and Senators.
CONGRESS MEETS ABOUT THIS TODAY!
HUD should modify to lessen the risk BUT don't get rid of it. This is one of the last loan programs out there right now that can get buyers into a home with no money. (They still have to credit and income qualify)
http://activerain.com/blogsview/605114/Down-Payment-Assistance-Congress
MORE ON THIS STORY IN THE WASHINGTON POST
No contracts can be written with a DAP or DPA
depending on where
you come from...
They must close by October 1, 2008