Down Payment Assistance Programs May Go the Way of the Horse and Buggy

As Congress and the President get closer (much closer actually – we may just be a week or so away) to agreeing on and passing the Housing and Economic Recovery Act of 2008, a lot of things are going to change in the mortgage industry.

Most of them are good news for homeowners, especially those struggling with mortgage payments.

Here’s a brief overview of some of the main items of the Housing and Economic Recovery Act of 2008:

  1. A tax credit – up to $7,500 – for first-time home buyers.
  2. An additional property tax deduction for folks who own homes but don’t itemize their taxes.
  3. Federal housing assistance aimed at helping up to 400,000 Americans in danger of losing their homes – allowing them to refinance to lower fixed rates than the mortgages they currently have.
  4. Almost $4 billion in grant monies for state and local governments to maintain and renovate foreclosed properties in their jurisdictions.

There are numerous other aspects of the housing rescue bill, but those are probably the big ones and the most positive items. However, there are some that may not be so great for everyone.

One is the proposed death of down payment assistance programs.

This is really a shame, because down payment assistance programs are an excellent benefit for both sellers and buyers, especially in troubled real estate markets. Down payment assistance programs are designed to allow home buyers financing with FHA loans to basically purchase their home without a down payment. The down payment is paid by the seller, through designated FHA-approved companies, such as AmeriDream and Nehemiah.

FHA down payment assistance programs are great when home sellers want to move their homes off the market and can’t find buyers who can afford a down payment. Even though FHA loans only require a 3% down payment, many home buyers simply can’t afford to put that much money down on their home but qualify for the home in every other aspect. They’ll make excellent homeowners and will be an asset to their communities; they just don’t have a down payment.

With down payment assistance programs, the seller is allowed to pay the buyer’s down payment and everyone wins. The seller sells their house for the price they want, and the buyer is allowed to fulfill their dream of home ownership. Who would disagree with that?

The lesson here is that time may be running out for FHA down payment assistance programs, so anyone considering buying a home with an FHA loan and using down payment assistance should act fast. They should get their loan in process soon to avoid any problems should the programs be canceled with the passing of the rescue bill.

Home ownership is the linchpin of strong communities, and now, more than ever, in many communities, people need avenues opened to them to buy homes, not closed. No question, the housing rescue bill will offer great help to hundreds of thousands of Americans in the real estate and mortgage markets. But it will also shut the door on an excellent program that helps folks, especially first-time home buyers and those with lower incomes, afford the keys and title to a home to call their own.

The door to down payment assistance is still open, for now. Anyone thinking about taking advantage of down payment assistance with an FHA loan should really contact a mortgage professional soon to get details of how long they have before the door is shut –potentially forever.

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