This month HUD set the time frame for deleting Down Payment Assistance. As DPA (Down Payment Assistance) programs help first time home buyers, it seems ridiculous that HUD would take away potential buyers from a market that desperately needs them. Privately funded DPA's have been responsible for nearly $3.8 Billion in cash to help hard working Americans become homeowners over the last 10 years! However, the foreclosure rate is 3x's higher for these loan programs as well, so they are moving towards eliminating them completely.
For the purpose of this e-mail, however, let's focus on the FACTS and not the political, economic and social ramifications:
•1) Per HUD, DPA (Down Payment Assistance) will be gone as of October 1st, 2008 Specifically, DPA from the seller is what is being eliminated. The down payment required on an FHA loan will be increasing from 3% to 3.5% and may still be gifted to the buyer from any party not financially tied to the transaction - meaning parents, relatives, friends, or like others may still provide a gift down payment to be used, but seller funded programs like Ameridream or Nehemiah are being eliminated.
•2) You must have credit approval prior to this date to fund your transaction (basically everything but docs out)
•3) Realistically, you have a month. Most major banks are already setting timelines of August 29th or the like as they do not want to get stuck with a loan they cannot sell. We still have access to over 50 lenders, but I prefer to play it safe when it comes to individual's single largest investments. If this does not motivate buyers to get off the fence, I don't know what will!
There are ‘rumors' out there that something will be taking the place of these programs. There is talk of bringing back DPA programs for those with higher credit scores. There is talk of FHA offering 100% financing. At this time, everything is just a rumor. Let's deal with the facts and that is we have about 30 days to utilize DPA. We still have the WA state Bond program, the USDA programs, House Key, etc. to call upon as they are not seller funded. Most are out of money and, as you can imagine, with DPA going away, the money used to fund these programs will become even more scarce.
It is now more important than ever to align yourself with a mortgage team who not only understands the market, but is staying up to date DAILY with the lending changes. Do not leave your paycheck, purchase or refinance in the hands of someone who is ‘practicing' on your files. Trust in us as we are the experts!!
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