Down Payment Assistance Programs

Providing home loan mortgage financing in Lake, Geauga, Mahoning, Columbiana, Erie, Sandusky, Seneca, Wyandot, Putnam, Hancock, Ottowa, Fulton, Williams, Henry, Defiance, and many more Ohio counties.

Down Payment Assistance Programs

Down Payment Assistance Programs - Down Payment Assistance Programs (DAPs) have become common and necessary for individuals who want to obtain an FHA mortgage without any down payment. In a common practice when purchasing a home, the seller of a home would contribute up to 3% to a charitable organization. A buyer of the home would then receive a 3% grant from the same charitable organization minus a fee (typically $350). The IRS has recently ruled that companies who do these types of transactions can no longer be considered a non-profit organization. FHA required that DAPs may only be acceptable from non-profit organizations, family members, employers, or close friends.

This practice accounts for nearly one-third of all FHA loans. Therefore this ruling will greatly limit the effectiveness of FHA.

To see the IRS rulings and see a list of companies who are no longer eligible, visit http://www.irs.gov/irb/

Some of the most popular include Ameridream, Nehemiah, and Home Down Payment Assistance. As many as 185 non-profits could lose their non-profit status because of this practice.

Down Payment Assistance - One of the biggest topics for first time home-buyers involves down payment money. The questions range from do I need to have any money to make a down payment on a home to how can I get some money to assist with making a down payment. There are many different ways to buy a home with a down payment or without and there are many different down payment assistance programs available throughout the country. Consult your Ohio mortgage broker to find out more information about down payment assistance and home mortgage loan programs for first time home-buyers.

Mny first time buyers look for down payment assistance programs because they erroneously believe they need a large down payment to buy a home. Actually a good loan officer, with the asistance of a good real estate agent, can usually get you 100% financing with liile or no closing costs.

Down payment assistance programs are not a free ride. The buyer is often required to take first time home-buyer classes and meet with budgeting and credit counselors. The process can be lengthy.

Also, the home usually has to pass an inspection performed by the entity offering the down payment assistance. This can also slow down the transaction.

In addition, the buyer is often required to live in the property for a set period of time.

All down payment assistance programs work differently and not all lenders will allow a borrower to use them.

The types of programs that are available to you will depend largely on your credit history. For many first time homebuyers an FHA loan is an excellent choice because it allows your friend and family to assist you in the purchase of a house by providing a down payment "gift" to help you with your down payment. If you do not have any cash to put down yourself, and do not have family who are able to assist you there are plenty of other types of loans available that do not require a down payment at all.

Borrowed and Gifted Down Payments - Loans and gifts can help with your down payment but you can not use this strategy for all loan programs. The most popular program for this tactic is the Federal Housing Administration or FHA. FHA allows 100% gift funds for your down payment. The gift can be from any relative or can be collected through new innovative programs, like the Bridal Registry where couples receive money into an account that can be used for the down payment.

Most lenders will require that a "Gift Letter" or "Gift Form" is filled out. It is a simple letter stating who is giving you the money, what their relationship to you is, and where they are getting the money from. The person giving you the gift may also need to show a bank statement or some other documentation of where the money is coming from, and they will need to sign a letter stating that it is a gift and not a loan.

Most loan programs will allow for a certain amount of money to come in the form of a gift from a family member. The amount that is allowed will depend on not only the lender and the home loan program you choose but usually how much money you are putting down also. Talk with your mortgage professional to see how much will be allowed for you to recieve from a family member and what the underwriting guidelines are.

Not all down payment gifts come in the form of cash. If you are buying the property from a family member you may also be gifted equity in the property.

Also, ask your mortgage professional whether there are programs offered by state agencies that provide downpayment grants/loans for first-time home buyers. Many states have such programs.

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