Ask and you shall receive: A saying that takes on new relevance when it comes to buying a house. An estimated 200,000 low and moderate income families obtain mortgages each year using down payment gift programs, according to officials at one such program, Neighborhood Gold. Despite the number of homebuyers taking advantage of these programs, there are many other stories of people who are unaware that such opportunities exist and, as a result, find themselves behind the eight ball the day they move into their home. There are a number of nonprofit organizations that provide down payment assistance. Some operate nationwide while others are regional. The monies provided are gifts or grants that do not have to be repaid. Furthermore, they do not involve second liens or second mortgages on the house. The grant/gift programs typically benefit a potential buyer who does not have the funds necessary for a down payment. In the case of the Neighborhood Gold program, the seller agrees to pay a service fee to the Buyers Fund, a non-profit organization that administers the program. The down payment provider advances the funds at closing to the settlement agent; the homebuyer closes and moves in to the house; and the down payment provider is reimbursed so the funds can go back into the pool that is used for down payment assistance. Such programs are often used with FHA loans. It is estimated that 20 percent of all FHA loans, about 17,000 per month, are written with the assistance of grant programs. However, because many people know very little about these programs, they are often overlooked as an option to help facilitate Conventional and Sub-Prime loans, with which they are also compatible. In addition, both Fannie Mae and Freddie Mac will purchase these loans on the secondary market. Let’s look at a few examples of these opportunities. Fannie Mae’s Flexible 100 requires no down payment, only a 3 percent contribution towards closing costs. That 3 percent can come from any source, including gifts. Similarly, Fannie Mae’s Flexible 97 requires a 3 percent down payment and a 3 percent contribution towards closing costs with funds for both coming from any source, including gifts. Freddie Mac has five programs permitting the use of gifts. Affordable Gold 97 allows gift money for closing costs only; Alt 97 and Affordable Gold 5 allow gift money for closing costs and entire down payment; Affordable Gold 3/2 and Community Gold, both 5 percent down payment programs accepting two-fifths and three-fifths, respectively, in gift money. The Department of Housing and Urban Development (HUD) also has its own down payment assistance program, the American Down Payment Program. The level of assistance, however, does not come close to that of the non-profit organizations. For
those intersested in learning more, the following are a few of the
non-profit organizations offering assistance: Consumer Debt Solutions,
Inc. www.cdsgrants.com,
Highland, NY; National Home Foundation www.nationalhomefoundation.org,
Potamac, MD; Nehemiah Program www.getdownpayment.com,
Sacramento, CA; and Neighborhood Gold www.thebuyersfund.com,
Fort Myers, Fla. |
