The fear of the http://www.blogger.com/img/blank.gifunknown: Down Payment Assistance

I spent most of my career in the finance world as a loan officer, then an underwriter, then a sales manager. I remember clearly that every year I would look back on the year before and think to myself, "Last year I had NO idea what I was doing!"
After two years in the business I was comfortable enough to speak to large groups of realtors at their weekly sales meetings. After four years I was winning awards for production. Finally after seven years I thought I knew it all. I was producing close to $100 MM per year in mortagage loans and considered by my Realtors an expert in real estate.
I went on to be a builder/developer and now am on the Realtor side of things. I have officially been in real estate my entire life, born into a family that owned Title/Escrow companies their entire life. So why is it that when the market changed and buyers became scarce, I had NO IDEA how to sell down payment assistance programs??
I had heard of them, sure, but nobody really ever needed them. There were plenty of 100% financing programs available as long as you were willing to pay a higher rate. They always seemed confusing and involved way too much effort. So I found myself a little embarrassed to learn that these assistance programs are quite simple and very abundant in the market place. They also happen to be one of the ONLY ways to help buyers that struggle to obtain financing for 100% of the price of the home. Here is a run down of what is out there:

USDA Rural Development Loans

These loans are based on geography. When I hear of USDA I think of meat! What we forget is that this is the Department of Agriculture and they are focused on Rural area development. This program is as simple as an FHA with no down payment requirements. It is typically available in areas outlying major cities and are popular in many suburbs that are more favorable than the City center. Many builders have figured this out started building specifically in these areas which means opportunity for more development otherwise.

Housing Authority Down Payment Assistance

Many local and State agencies allocate a certain amount of funds each year for homebuyer assistance. Typical FHA loans require 3.5% down payment and this assistance is popular coupled with FHA loans. The authority typically offers 4% assitance so the total financed is 100.5% (the remainder can be used for buyer closing costs). These programs typically require attending a 2 hour homebuyer class and have income maximums of around 115% AMI.

FHLB Subsidies

These programs are specifically aimed at providing affordable housing options for those considered very low income to moderately low income. This can be also in the form of USDA direct loans but are more commonly offered by developers of large housing projects. The developers apply for grants by the government to allow them to credit a certain amount of subsidy to the home buyer. Typically this susidy is 5% but we currently have a project that is offering buyers up to $40,000 in down payment assistance. These are typically forgiven over time (usually 5-7 years) and have no monthly payment obligation. Income restrictions are tight on these but what a great way for someone to purchase a $100,000 home for $60,000!