Jeffrey Ragan asked:
Most first time home buyers do not have the required down payment necessary to obtain a loan. Loan requirements can range from 3% to 20% down payment. Thus the need for down payment assistance is born. Since this is a requirement, the search for first time home buyer assistance begins.
What are Down Payment Assistance Programs?
They are organizations that serve as a third party to your transaction. For the most part they are a non-profit charity organization. This is really legal!! All you have to do is get the seller to allow you to use down payment assistance for your down payment and find a lender who permits this type of transaction.
Why do I need the seller’s permission?
Quite simply its because you will be asking the seller to make a charitable contribution to the third party organization equal to your down payment plus whatever their administration fee is. Is the seller making my down payment? Not really, you are, let me explain. You’re going to borrow the down payment money from the lender and then give it to the seller and he/she makes a donation to the charity. So you see, you are the one that is making the down payment. The charitable organization puts up the money to get the transaction started and then receive the money back from the seller at closing. The seller gets the money from the lender to donate to the charity, so he/she is just the “middle man.” But the seller has to agree to be that “middle man”, thus their permission is needed. But don’t forget, you will need a lender who will permit this type of transaction as the down payment.
What kind of lender will permit this type of down payment?
Unfortunately, not all lenders will permit first time home buyer assistance. FHA is one program that will permit this type of down payment help. Let me tell you a little story. I had a single mother come to me for a home loan. She was looking to buy her first house. Now she had 1 child and was expecting another. She had been working on the same job for about 4 years and was making pretty good income. She had two problems. One, she did not have any down payment money. Two, she had about $2,000 in medical collections on her credit report. Her credit score was low because of this.
To make a long story short, she bought that house with only $500 out of her pocket and she paid off the collections at the closing. So she became a new home owner and was able to improve her credit picture at the same time. She wouldn’t have been able to do this without the charity organization providing the first time home buyer assistance and the seller willingly becoming the “middle man.” Wasn’t it awesome that the buyer could get that kind of help?
What kind of charity organizations do this?
These type of organizations are called Charity/Not-For-Profit 502c3. You don’t have to be a first time home buyer to receive this type of assistance either. Most states have these type of organizations to help. Remember, this is not a grant. Grant money doesn’t have to be paid back, but this type of first time home buyer assistance you will pay back in your loan. So, it’s not a gift. The funds are later wired to the Charity/Not-For-Profit 501c3 organizations as a donation. Beware of a 501c3 organization that calls these funds grants, because its not free money. They require a donation back.
The cool thing is there are no income limits, house price ceilings, and you can be a prior home owner. You can use this kind of first time home buyer assistance no matter the price of the home. And it is legal!!!
So if you want to buy that first home, this is a fabulous way to get that needed down payment. Although there’s some work involved. You have to find a lender who will permit this type of down payment and a seller who is willing to be the “middle man.” And most importantly, a charity organization that provides this type of assistance. This doesn’t happen quickly, so be sure to allow plenty of time to get your “ducks in a row!”
Cody
Most first time home buyers do not have the required down payment necessary to obtain a loan. Loan requirements can range from 3% to 20% down payment. Thus the need for down payment assistance is born. Since this is a requirement, the search for first time home buyer assistance begins.
What are Down Payment Assistance Programs?
They are organizations that serve as a third party to your transaction. For the most part they are a non-profit charity organization. This is really legal!! All you have to do is get the seller to allow you to use down payment assistance for your down payment and find a lender who permits this type of transaction.
Why do I need the seller’s permission?
Quite simply its because you will be asking the seller to make a charitable contribution to the third party organization equal to your down payment plus whatever their administration fee is. Is the seller making my down payment? Not really, you are, let me explain. You’re going to borrow the down payment money from the lender and then give it to the seller and he/she makes a donation to the charity. So you see, you are the one that is making the down payment. The charitable organization puts up the money to get the transaction started and then receive the money back from the seller at closing. The seller gets the money from the lender to donate to the charity, so he/she is just the “middle man.” But the seller has to agree to be that “middle man”, thus their permission is needed. But don’t forget, you will need a lender who will permit this type of transaction as the down payment.
What kind of lender will permit this type of down payment?
Unfortunately, not all lenders will permit first time home buyer assistance. FHA is one program that will permit this type of down payment help. Let me tell you a little story. I had a single mother come to me for a home loan. She was looking to buy her first house. Now she had 1 child and was expecting another. She had been working on the same job for about 4 years and was making pretty good income. She had two problems. One, she did not have any down payment money. Two, she had about $2,000 in medical collections on her credit report. Her credit score was low because of this.
To make a long story short, she bought that house with only $500 out of her pocket and she paid off the collections at the closing. So she became a new home owner and was able to improve her credit picture at the same time. She wouldn’t have been able to do this without the charity organization providing the first time home buyer assistance and the seller willingly becoming the “middle man.” Wasn’t it awesome that the buyer could get that kind of help?
What kind of charity organizations do this?
These type of organizations are called Charity/Not-For-Profit 502c3. You don’t have to be a first time home buyer to receive this type of assistance either. Most states have these type of organizations to help. Remember, this is not a grant. Grant money doesn’t have to be paid back, but this type of first time home buyer assistance you will pay back in your loan. So, it’s not a gift. The funds are later wired to the Charity/Not-For-Profit 501c3 organizations as a donation. Beware of a 501c3 organization that calls these funds grants, because its not free money. They require a donation back.
The cool thing is there are no income limits, house price ceilings, and you can be a prior home owner. You can use this kind of first time home buyer assistance no matter the price of the home. And it is legal!!!
So if you want to buy that first home, this is a fabulous way to get that needed down payment. Although there’s some work involved. You have to find a lender who will permit this type of down payment and a seller who is willing to be the “middle man.” And most importantly, a charity organization that provides this type of assistance. This doesn’t happen quickly, so be sure to allow plenty of time to get your “ducks in a row!”
Cody
