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How to Write a Contract With A DAP

First off - A DAP is the "mortgage babble term" for DownPayment Assistance Programs. "Home sellers can help buyers pay closing costs by giving a portion of their proceeds back to the buyer at closing. The amount of seller assistance that's allowed depends on the type of loan the buyer is getting."

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. cary fha loans

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!

Posted by Eleanor Thorne 919-649-5057 Cary Mortgage Loans on 03/30/2008 04:38 PM

Comments (16)

mortgage rates cary, home loans cary, first time homebuyer cary, mortgages raleigh

Originally posted at: Mortgage Lending, NC Style: How to Write a Contract With A DAP

This post has been included in North Carolina Information Wake County, NC Information Cary, NC Information

16 Comments on How to Write a Contract With A DAP

MAR

2008

Be careful not to create false value for the property if you have to increase sales price to cover the funds from the seller.

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!

MAR

2008

I agree! You definitely need a realtor and a mortgage professional that have done these contracts before to make sure they get the proper credit. It really does make a difference. But if done properly can be beneficial for both the borrower and the seller

Great post Eleanor. I use these on a regular basis and have seen it increase my production and that of my referral partners. It is a great tool.

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!

If spot doesnt work with a Professional Real Estate Agent and Lender, Jane might let Spot bite

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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There is so much more information on our website. Give me one deal and I'll earn the rest!

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.

APR

2008

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

JUL

2008

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

SEP

2008

So you say it can be tricky and one needs a real estate professional. Well I am a RE professional but I don't understand how to present it nor write the contract nor what to do with the price. How do I learn? I have a buyer now (a friend) who wants to use the Nehemiah program and her mortgage broker has approved her for $200,000. He said something like, just write in seller concessions of $6500. Is this correct? and should we then offer $26750? And tell the seller he will get $200,000 and not have to pay anything from pocket? Oh and it is a short sale. I feel very stupid about this but don't know who to go to learn. Any help will be greatly appreciated.

SEP

2008

No contracts can be written with a DAP or DPA

depending on where

you come from...

They must close by October 1, 2008

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