How Downpayment Assistance Works
56518
Finance > Mortgage
Nov 25, 2007
driley
How Downpayment Assistance Works
Potential home buyers often discover that while they'll have no trouble making their monthly mortgage payments, they nonetheless can't buy a home because they lack the funds to make the necessary down payment and closing costs. Fortunately, a number of solutions to this problem exist, one of the most common being: down payment assistance programs. While sellers are forbidden from giving gifts of down payment funds to their potential homebuyers directly, these down payment assistance programs guarantee that funds to financially-challenged potential homebuyers are delivered at closing to cover all or a portion of the down payment and closing costs. Only certain sellers will participate in these programs, and it can often take a great deal of work, mandatory classes, and extra paperwork to accomplish. The upside is that not only can people afford homes who otherwise couldn't, but they might even get a lower interest rate on their loan. First the seller would enroll the home in a relevant program, contributing funds equal to the amount of down payment assistance the buyer is to receive at the time closing, plus a fee of around 0.75% of the purchase price of the home. Then, upon closing, the down payment is then wired from the program to the agent handling the closing, keeping the seller removed from the process of transferring those funds. Sellers can also help reduce the cost burden on buyers by offering to pay all or portions of the closing costs involved in the sale of the home. They do this by simply giving back to a part of their proceeds to the buyer at the time of closing. There are limits, however, on how much assistance a seller may provide, depending on the kind of loan the buyer is obtaining. And though down payment assistance may seem undesirable to sellers considering whether or not to accept someone's offer to buy their home, it could actually be to the seller's advantage every bit as much as the buyer's. This is because a buyer able to afford the closing costs on a home can more easily get away with making a lower offer (and having it accepted), whereas a buyer requiring down payment assistance is more likely to make an offer closer to the seller's asking price in order to compensate for their need for down payment assistance. Realtors and lenders both are qualified to aid would-be homebuyers in finding and selecting the right down payment assistance program. Realtors and lenders alike are generally more than glad to explain how an offer to purchase property should be phrased in order to ensure the inclusion of down payment assistance in the offer still allows it to comply with underwriting guidelines. Many down payment assistance programs are offered by state and local government agencies, aware that it can be difficult for a first-time homebuyer on a limited income to secure a home loan. And despite the popular misconception, these programs are not at all a kind of welfare. It may surprise you to discover how high of an income level a person may have and still qualify for these down payment assistance programs. This is particularly true if the primary borrower has dependents, like children. Most of these down payment assistance programs have limits on how high a purchase price participants can pay for a home, adjusted based on the applicant's qualifying income level.
Somerset Mortgage Lenders has been in business since 1979. Whether you are looking to refinance your mortgage, consolidate your debt, improve your home, we can help. Call us toll-free at 1-800-675-9783 or visit us online.
send email to driley
Write a Review
Add to My Favorite
Refer it to Friend
Report Article
Other links at Finance > Mortgage
Factors like rate of interest, type of mortgage and flexible repayment schedules determine whether the mortgage is cheap or not. This article helps find cheap mortgage options that combine all the factors listed above.
Category:
Mortgage loan refinancing is simply obtaining a new mortgage loan to pay off your old mortgage and get new rates. There are a number of reasons why people choose mortgage refinancing. One is to get lower rates, to build home equity faster, or to change th
Category:
All mortgages tend to fall into one or two basic categories - they are either a fixed rate mortgage or an adjustable rate mortgage. Among these two categories, however, there are many different options that allow you to get a mortgage that suits your pers
Category:
This article looks at how a business owner can obtain a commercial mortgage.
Category:
Site Sponsor
Directory Statistics
Articles: 68252
Categories: 501
Yahoo Entertainment
