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Down Payment Assistance Programs – How They Work, And How To Use Them By Rob Beeman There is more than one form of down payment assistance program available to the property buyer seeking them. There are those offered by local governments, be it city, county or state; those offered by the federal government; and those offered by non-profit organizations. This will help you understand them, locate them and use them to your advantage if you need them. How can you, as the seller of property, benefit from a down payment assistance program? It’s simple; the assistance to the buyer can help: ·Sell the property faster ·Make the property attractive to more buyers (especially those with limited funds) ·Put more profit into the pocket of the seller If a buyer is qualified to gain a mortgage however lacks the required down payment, or even the necessary funds to close, using a down payment assistance program can now make that non-able buyer an able buyer. So the buyer short of cash, who had to pass on other properties because of the lack of necessary funds required, can now purchase your property because you directed them to a down payment assistance program. The buyers that you used to have to turn away because of not enough cash required can now possibly become a sale. Thus, faster sale – faster profit. You can now advertise the property differently to gain greater response. Consider an ad like this: 555 Maple Lane, 3Br, 2Ba, lg yrd. Own it for only $1000 down! 555-5555. Bet you’ll get more calls! Most of the down payment assistance programs have certain requirements that must be met in order to be used. One such requirement is usually the need for the buyers to have some of their own cash into the transaction. The amount of cash required by the buyer varies from program to program; however most require at least $500 to $1000 of the buyer’s funds to be in the deal, or in some cases as much as 1% of the sales price. If the buyer is using funds offered by a local municipality (city, county or state) in the form of a grant or low interest loan (second mortgage), and the seller had originally planned on offering seller’s assistance to the buyer for settlement help, this will allow the seller to gain an additional profit, since little or no seller’s assistance will be needed. As we mentioned earlier, there is more than one form of down payment assistance program available to direct buyers to in order for you, the seller, to reap the rewards. They are: ·Non-Profit Grants ·Municipal Grants ·Municipal Low Interest Loans We will cover the pros and cons of each. What is available will vary in different parts of the country, but we will supply you resources to investigate what is available near you. Non-Profit Grants This form of grant is offered by a qualified non-profit organization as assistance to the buyer for help with down payment and/or closing costs associated with the purchase of their primary residence. The funds, wired directly to the settlement agent’s escrow account, come from a “pool” of money available to assist buyers. The amount of funds supplied to assist the buyer are deducted from the seller’s proceeds at settlement and wired back to the non-profit organization after settlement to replenish the “pool” in order to help the next buyer requesting aide. In addition to the reimbursement to the “pool”, the seller is charged a fee by the non-profit organization to cover administration costs. This fee varies between programs and is disclosed in their advertising info. Here are a few of the programs that we are aware of: www.nationhomefoundation.org www.housingassistancenetwork.com www.mortgagepages.com / www.partnersincharity.org www.buyers-assistance.com www.fha-home-loans.com www.bmortgage.com/down_payment_programs.htm www.ameridreamcharity.org www.thebuyersfund.com www.getdownpayment.com www.genesisprogram.net www.dsrdownpayment.com www.fhap.org www.nationwidedownpayment.org www.cdsgrants.com www.neighborhoodgold.com www.fairhousingassistance.com www.familyhomeproviders.org www.americanfamilyfunds.com www.ezdownpayment.com www.cornerstonegrant.org www.usadownpaymentassistance.com www.hartprogram.com
Municipal Grants Municipalities such as city, county or state typically offer grants (which are not required to be repaid) to assist purchasers with down payment and/or closing costs assistance. There usually are restrictions on the use of the programs such as: maximum household income, number of persons occupying the property, maximum sales price of the property, and home buying education seminar attendance. The funds are normally replenished annually, and are available for use as long as they exist. A link to a web site that offers numbers and addresses for most state housing and finance authorities is: http://www.mortgage101.com/Articles/DownPayment.asp?ArticleID=1013&p=ABCentMiss . Municipal Low Interest Loans The low interest loans offered by municipalities (city, county or state) are typically linked into participating local mortgage lenders and banks. The funds are secured by a second mortgage on the property and are usually not required to be paid back until the property is sold or refinanced, or the first mortgage is paid off. The funds are normally replenished annually and are available for use as long as they exist. Use the link referenced above to locate the municipalities near you to gain info on what programs are currently offered. In addition here are a few sites that are regional: www.ci.longmont.co.us www.ci.modesto.ca.us www.homestreetbank.com www.cityoforlando.net www.ihfa.org www.mhdc.com
Rob Beeman started investing in real estate in 1996, and enjoys passing on to other investors: Knowledge, Information and Contacts in the forms of Books, Special Reports, Guides and Newsletters, to help them start, accelerate, or supercharge their business.
You can find his writings on “How To Discover Opportunities Others Overlook” at either of these sites: www.theartofrealestateinvesting.com or www.findingforeclosuresforprofit.com .
Rob’s knowledge and experience has been gained first hand, “in the trenches.” An Author of two books on real estate investing, “The Art of Real Estate Investing” and “Finding Foreclosures for Profit”; he does not consider himself to be a “Guru”. He is a “Hands On” Real Estate Investor starting every day with a desire to discover deals that others overlook, and pass on a little Knowledge, Information and Contacts to other investors.