|House Plan Weblog
Mortgage Loans with a 5% Down Payment or Less - Part II
Posted On: 2009-07-18 at 02:14:37 PM
Non-Profit Assistance Programs
Another option to achieve a no down payment purchase is the current wave of non-profit assistance programs. Some are only available to first time homebuyers but the vast majority is accessible to everyone. Most programs use a loophole in FHAs rules that allow non-profit groups to contribute money for down payment and closing costs. The non-profit group will charge a fee of around $500 and allow the seller to deposit an agreed upon amount with them. The non-profit organization will then forward that amount to the buyer to be used toward their closing costs and down payment. The amount put toward the buyers costs is agreed to upon acceptance of the contract.
These programs will require specific language in the contract and there is a maximum rate of around 3% that can be contributed. This type of contribution can be used on a conventional loan directly with no additional steps necessary. The seller and buyer simply would agree to the amount contributed and that amount would be debited from the seller then credited to the buyer at the closing table.
To conclude, there are many ways and options to purchase a home with a no or a low down payment. It is something that can be worked out creatively with the seller. Even in hot markets where credits to the buyer are rare this is possible. The buyer could make an offer of more than they would otherwise want to pay in the amount they wish to have credited back at closing for costs and down payment.
As long as the property will appraise for the higher amount, and in most busy markets it will, the buyer could take advantage of this option. One of the only downsides to accessing a no or low down payment is that the interest rate is typically a little higher. Usually though, the appreciation in value, todays low interest rates, and simply the ability to own property will more than make up for the higher rate.
Submitted by: Blogmaster