It’s official.
The housing rescue bill that President Bush signed into law does some good things for housing, but it effectively kills some prominent Down Payment Assistance Programs aimed at helping cash poor buyers.
Down Payment Assistance Programs (DPA’s) are programs that offer help to home buyers who are lacking in down payment funds. Some of these programs are available through local government agencies – and these are not the kind affected. The kind affected by this legislation are those that allow the seller to contribute or fund the buyer’s down payment.
Two of the more popular programs of this type are the Nehemiah program and the Ameridream program.
Most loan programs available to purchaser’s require the buyer to have some sort of cash investment when they buy. Some programs (FHA for example) allow the cash investment to come completely in the form of a gift from a relative or non-profit organization.
Nehemiah and Ameridream are two such programs that would allow the seller to contribute to their “pool” of down payment funds, which then offer a buyer of a property the necessary cash investment to buy a home without money coming from their personal funds.
So a seller could sell their home to a buyer who had no money by using one of these programs. It would in essence be a way for the seller to help the buyer buy their property without a down payment. This is a great tool for buyers and sellers in a slow market.
Others would argue that it allows people to buy homes with no “skin in the game”. While this is true, and there have been people abuse this, it still can help those who can afford to own, but who lack a down payment.
Most people can still afford the next best thing, which is a 3% minimum cash investment on an FHA loan, but losing a good tool in a tough market, just seems like bad timing…
Craig Garcia is a Managing Member of Bridge Capital Lending, LLC. A mortgage and investment firm specializing in Investor Loans that Use Private Lenders that fund Hard Money Loans. Craig can be reached at 877-8GO-GREEN or 954-217-9518. Gene Schroeder and Angelo D’Alessandro are the founders and owners of Bank On It! – A Real Estate Investment Firm that sells Investment Properties at Wholesale Prices. Gene and Angelo can be reached at 954-515-0030. The three have also formed a service to connect prospective borrowers to a network of Local Mortgage Brokers called 888-2Lend-Fast.
Tags: HUDLoans, Nehemiah, Down Payment Assistance
