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Reactions to the housing bill (HR 3221), can you still buy a home with down payment assistance?

Posted on July 24, 2008 by Ray Williams (NMLS #216267).

Today the House past a monumental bill that will prevent down payment assistance from occurring on FHA loans and increase the down payment from 3 to 3.5% as well. What this means is that if the senate passes the new version, and our President signs it into law then seller funded down payment assistance will disappear. One company that we have used for this resource Nehemiah has helped over 225,000 families through down payment assistance.

To understand how this will impact you as a home buyer, and home seller. You have to first understand how this works. If you are a home seller trying to sell your home in a tough market as Denver has been. You may receive a contract where the buyer asks you to participate in the Nehemiah program and contribute 3% of your sales price to the program and pay the administrative fee as well. So if you were going to be netting $260K on a sale of your home, it would be reduced by $7,800 down to $252,200 by contributing the money to the program. Then the buyer receives a 3% grant from Nehemiah to meet their downpayment requirement put forth by FHA. Everyone wins right? According to HUD their reserves have been reduced by poor performance of mortgages from folks who received the down payment assistance.

As a buyer you were able to meet the 3% down payment requirement put forth by FHA and get into your home in essence with no money down (if the seller also paid your closing costs).

What the passage of this bill will do if put into law is require that you once again have a down payment for you home loan. UNLESS~ you are a veteran because the VA home loan is a 100% home loan. Also, you can use a local housing authority called CHFA to purchase and receive your 3% as a silent loan that is repaid once you refinance or sell your home. Check out my link to CHFA loans on the website. This type of loan will also allow you to receive the monies as well. These are two important things to remember as things continue to evolve after the passing of this bill.

The most interesting part of the bill is the section that states the government will give first time buyers a refundable tax credit (kind of like an interest-free loan) repayable over 15 year with no interest of up to $7,500. The credit will begin to phase out for a single filer with an adjusted gross income over $75,000 and $150,000 for a joint return. (stay tuned on this point this might be the bullet). 

If you have questions about how this will or might affect you as a first time home buyer let me know rwilliams@summit-mortgage.com~

Ray

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