Have you heard of the Newsong Down Payment Assistance program? ( http:www.buyers-assistance.com ) Is this a good program and it is worth pursuing? I am getting really close to buying my first home and I have been trying to find the best program. Are the rates affected when using this program? Any information you can share regarding down payment assitance program will be greatly appreciated by me and others on this forum. Thank you!
Here is how these programs work: FHA requires you to make a down payment of 3% on a home purchase loan, but they allow these funds to be "gift money" from some sources. FHA does NOT allow these gift funds to come from the seller. These payment assistance programs are a way to get around that restriction. What they do is they "gift" you the money for the down payment, and the seller "donates" money to the organization (it's a non-profit) from the sale of the house. What the seller donates is equal the gift you get for teh down payment plus a service fee which is usually $750. Often what will happen is the seller will bump the sales price to make up for it. FHA requires you to put 3% down on your home because putting your own money into the transaction reduces the chance that you will walk away and let the home go into foreclosure. Many lenders won't touch these gift programs because the foreclosure rate is about four times as high as homes purchased without these programs. Of the ones that do, it's not uncommon for them to charge an extra half point for the extra risk. There is talk in the industry about closing this loophole and doing away with these programs, but for now they are still legal. These programs are only for FHA purchases. Should you look into it? Well, that depends. Will you need help with the down payment? If so, sure, it's an option. It makes the negotiation that much more complex, but that's why your realtor makes the big money she does. If you don't need the help, then there isn't really any benefit to the program.
I do not qualify for FHA though. The maximum price for FHA in my area is $153,000 and I am planning to purchase a $170,000 home. I kind of need downpayment money because I don't want to spend all my cash on the purchase and not have security just in case I lose my job. You know how the economy is... there are layoffs left and right. What other options do I have? Or what do you recommend?
I think that this occurs because the seller raises the price to compensate for the "gift" and the progam itself costs money. Unless you're buying a seriously underpriced home, you risk financing too close to appraisal, making it harder if you get into financial trouble to sell (and net profit) for what you owe. I was going to do one gifting program, but it added $1500 to my closing costs, and I chose another route.
Can you share what route you took? I may be able to afford 5% down but you think I can ask the seller to pay for closing cost? Are they allowed to do that?
gc After reading your post and the responses so far, I would say that some of the information is good and some not so good. While FHA is the most common use of gifting programs, and there are several out there, a few sub-prime lenders will allow them. Also, some of the conventional lenders will also accept them. In order to be able to better advice you, I would need to have some understanding of what your credit situation is. If you can provide some basic information about your credit scores and what, if any, negatives you have. Also, what part of the country are you located in? Good luck to you. fla-tan
