Resurrection of Down Payment Assistance?

By
Real Estate Agent with The Devonshire Company

I wrote about the demise of Seller-funded down payment assistance programs just a few weeks ago-as of October 1st they will no longer be allowed.

Well, things may turn around sooner than we originally thought.

There is currently a bill in the House, HR6694, which, if voted into law, will resurrect the use of these programs with some minor changes.

HR6694 has a very important support system in the National Association of Realtors. NAR's goal with the new bill is to "mend, not end" this type of assistance. The new bill will tie Seller-funded down payment assistance to buyer's credit scores.

Essentially, buyers with credit scores of 680 or higher will be permitted to use these programs and will be treated like other borrowers. Buyers with scores of 620-680 will be able to use the programs but will pay higher insurance premiums. Buyers with scores less than 620 will not be able to use the programs.

Another stipulation of the new bill will be that the entities offering this type of assistance will be required to make financial counseling available to Buyers. This, however, will not be mandatory.

While I am a Realtor selling Denver real estate and this will mean easier financing for home buyers and less brain damage on transactions, this new bill will not stop the artificial inflation of home prices in order for the seller to cover the costs of the assistance (which is one of the reasons HUD eliminated the programs in the first place). It will only make sure that buyers are more qualified when entering into these situations.

I also believe that home ownership counseling should be mandatory for those utilizing seller-funded down payment assistance programs. Even programs in Colorado such as CHFA require classes on the subject and it greatly reduces the chances of the loan going into default.

HR6694 is expected to pass in the House but experts believe it will face a tougher time in the Senate. (Click here to read entire article)

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