This post was written by Justin Williams a lender from Virginia Beach. I reallly liked this post to help buyers out and told Justin I was going to wait a few days to re-blog it for buyers in Ann Arbor.
I am not a lender, so I don't pretend to know all about the current loan programs available.
I am disabling comments so please comment on Justin's blog, as he is the expert on these FHA Down Payment Assistance Program Alternatives.
Many of the communities surrounding Ann Arbor do qualify for he Rural Home Development loan.
The Bad News…DAPS Going Away
The Housing and Economic Recovery Act of 2008 eliminates seller-funded down payment assistance programs (DAPs) as an acceptable source of funds for FHA loans for all lenders.
Officially, the Act eliminates seller-funded DAPs on FHA loans with final credit approval issued to the borrower on or after Oct. 1 2008
But There is Good News… FHA Alternatives
- FHA Cash to Close Savings Plan
- FHA Sweat Equity
- FHA Bridal Registry Account
- 1st Time Home Buyer Tax Credit
- City Free Grants / Municipal Programs
- State Programs / V.H.D.A
- USDA Rural True 100% Loans
FHA Cash to Close Savings PlanThe FHA cash to close savings plan is a way to get pre-approved for a Construction loan being built without having the liquid assets at the time of application. This is a great way to Buy Now & Save Later.
- Borrowers must provide a written statement as to how they intend to save the funds to close.
- A monthly savings plan that identifies the borrower’s savings plan for the funds needed for closing must be completed in its entirety.
FHA Sweat Equity Making a ComebackBelieve it or not FHA Sweat Equity Program has been around forever. The idea behind Sweat Equity is a way to have the Seller Credit for Purchaser's Down Payment through Labor or Materials being put forth into the house.
Labor performed or materials furnished by borrower before closing may be considered as the equivalent of a cash investment. The idea behind this is:
- Buyers to get with the Contractors after an appraisal is done to lend "LABOR" to compensate for "Credit" towards down-payment.
- Buyers to paint the house or do some side jobs to help earn "Credit" for the "Labor"
- The Sellers will pay for the credit and can raise the sales price in order to compensate for the credit.
- Sweat equity may be gifted subject to both gift requirements and additional requirements.
- Borrower’s labor may be considered as the equivalent of cash if the borrower can demonstrate his/her ability to complete the work in a satisfactory manner.
- Delayed work (on-site escrow), clean up, debris removal, and other general maintenance cannot be included as sweat equity.
- There can be no cash back to the borrower in sweat equity transactions.
FHA Bridal Registry Account
HUD allows couples who are planning to get married to establish a bridal registry savings account to help them accumulate the down payment necessary to purchase first home together.
Bridal Registry Account is also available for other situations where an individual or individuals typically receive gifts.
- The borrowers must open an interest bearing savings account with a financial institution supervised by a federal or state agency
- The borrowers must provide a register showing the names of all donors and the dollar amount that has been deposited into the bridal registry account
- There is no requirement that the bridal couple be married prior to closing the mortgage loan
First Time Homebuyer Tax CreditWe all know about the First-time Home Buyers tax credit of $7,500 available for homes purchased on or after April 9,2008 and before July 1st 2009.
This can be used as leverage for Parents or Family Members to provide that extra kick in helping with the down payment. This is a pretty much guarantee for a re-payment during tax time!
For extra assurance and comfort have your local title company write out a notarized agreement to re-pay back the loan from the family member during tax time to use the $7,500 tax credit.
Municipal Programs / City Grants DAPSEvery City has a local Grant and TRUE Down Payment Assistance Program to use with Home Buyers. We have forgotten these lost gems due to the fact of the popularity of Seller Assisted Daps being used, now that they are gone the city grants are becoming extremely popular.
Why not use city grants? Its there for a reason and its FREE. Below are examples of my local city grant in Virginia Beach.
- Up to 10% of Sales Price to provide the grant
- $63,000 income or less to qualify
- Up to $7,000 for First Time Home Buyer Grants
VHDA / State Programs
Check with your local state agencies to find the TRUE 100% financing, well actually 103% financing if you live in Virginia with the VHDA Loan Program.
The States have set aside money that goes hand in hand with city programs all reaching the end effect of helping new homeowners with down-payment and achieving home ownership. Check with your local Mortgage Expert on these programs to see if you qualify.
- VHDA - Virginia's Link http://www.vhda.com
USDA Rural 100% Programs
Good News USDA Rural Loans got Re-approved for 2009.
The rural or Agriculture Loans are another true 100% Financing Loans. You may be surprised that your local cities have pockets of RURAL areas that are zoned as Agricultural.
Call your local tax assessment office to find out which areas are zoned as Agricultural and "BAM" you get a nice 100% financing loan!
http://www.rurdev.usda.gov/
There you have it, Creative and New Alternatives to help Homeowners to provide down-payment assistance help and achieve higher than normal financing options!
Where there is a will there is way call your local mortgage expert today!
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