Down Payment Assistance Program |
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The Down Payment Assistance Program is a fast and easy way to help buyers with money at closing for no down payment mortgage and assistance for closing costs that they do not have to repay. Down payment assistance is used for residential and commercial loans. We're a nonprofit organization dedicated to increasing opportunities for individuals across the nation who dream of the benefits and stability that homeownership offers. Our mission is quite simple. We believe that Americans who dream of owning their own home deserve a chance of homeownership. The Down Payment Assistance Program can help! Whether you're a first time home buyer or simply starting over, we're there to help. Down Payment Assistance is used by thousands of home buyers every month. Flexible down payment grants are compatible with most types of loans offered by lenders. Down payment assistance helps more people own more homes in America with no down payment |
How do they work?
In simple terms, a down-payment assistance program involves having a home seller provide a home buyer with cash for a down payment. By taking part in this program, a seller can potentially attract a larger number of homebuyers to his or her property. But it's a bit more complicated than that. Because a federal housing regulation prohibits a seller from directly giving a buyer down-payment money, a third party must be involved. These are the administrators of down-payment assistance programs.
They oversee the transfer of money from the seller to the non-profit organization. In turn, the organization gives the home buyer a similar amount for the down payment on the home (the nonprofit takes a piece of the deal through a percentage of the transaction -- typically one percent -- or a flat fee). The gift is treated as a down payment. The buyer has no part in the transfer of funds, and he or she is not required to pay it back.
Down payments covered by these programs generally fall in the range of three percent to six percent of the home's selling cost.
Too good to be true?
There are some excellent down-payment assistant programs. There are also some dubious ones. It's important to confirm that the nonprofit organization with which you're dealing is of the former variety before making any commitments.
A good first step is to restrict your dealings to nonprofits that belong to the Home Gift Providers Association (HGPA). The HGPA members are required to adhere to a prescribed set of best practices and a code of ethics. Its website includes a list of member companies.
It's also wise to sniff out unsavory down-payment assistance providers with a demanding list of questions. Ask each for a record of its financial stability. Ask about partnerships it enjoys with community organizations and businesses. Ask if it ever endorses the practice of allowing borrowers to use their down-payment gifts to pay off bad debts, judgments or liens in order that they might qualify for loans (HGPA discourages this). And stay alert to any sign that the nonprofit is giving kickbacks to real estate agents, mortgage brokers or anyone else involved in the mortgage transaction.
The valuation piece
Sometimes, home sellers inflate the price of their homes to compensate for the gifted money. That's bad news for a buyer, who can end up paying more than market value for a house. A real estate agent can help you determine if a home
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