How to buy a home with no money down...
A buyer may qualify for a
mortgage loan, but lack the
down payment. Now, home
ownership is still possible thanks to
several programs that have been
created to offer buyers down payment
assistance.
In general, most loan programs
require a minimum down payment.
FHA loan programs require the
borrower to pay 3 percent of the
purchase price of the house as a down
payment. Conventional loan programs
typically require a minimum of 5
percent down payment.
Realtors and lenders can connect
buyers with down payment assistance
programs such as The Nehemiah
Program, Futures Home Assistance
Program, and the AmeriDream Program.
Each program has its own
guidelines for participation and
the seller must also agree to participate in the program.
Buyers receive the amount of their down payment
from the participating program as a
gift. The down payment does not have
to be repaid to the program by the buyer.
However, in exchange for the
organization's gift to the buyer, the
seller must agree to make a contribution of equal value back to the
sponsoring program plus an administrative fee.
The administrative fee may be a flat
fee such as $750, or the fee may be a
fixed rate such as 1 percent of the
buyer's loan amount.
The buyer's realtor will include specific language in the sales contract outlining which down payment assistance program will be used and the amount of the seller's financial conteibution to the program. In order for the
seller to be willing to pay these monies
to the program, the buyer must offer a
greater sales price for the home than if
the home were being sold without the
seller's financial contribution.
Along with the down payment, the
buyer will also have to pay closing
costs such as loan origination fees,
attorney's fees, and taxes. A buyer
may avoid paying a large amount of
closing costs if his realtor stipulates in
the sales agreement that the seller will
pay a certain amount of the closing
costs. The realtor will discuss an
estimate of the closing costs with the
lender prior to the contract negotia-
tions. The amount of a closing cost
contribution is then negotiated along
with the sales price of the contract.
Prior to closing the sale of the
home, the lender will order a home
appraisal. The home's final sales price
should not exceed the appraised value
of the home. If the contract sales price
is more than the home's appraised
value then the lender will not agree to
finalize the loan. The parties must
renegotiate the terms of the contract, or
the buyer must select another home
to purchase. Such negotiations may
prove disastrous without the effective
services of skilled realtors.
For more information on down payment assistance programs, visit these sites...
Nehemiah Program
Futureassistance Program
AmeriDream Program
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