First Time Home Buyer Financing
Coming up with money for a down payment for your first time home buyer financing can be difficult if you haven’t had much time to save or are unable to rearrange your finances to begin doing so. Luckily for you, dear consumer, there is a non-profit sector in our country which tends to be good at making things happen. By working it out with the seller, you can use a special method to get first time home buyer financing.
Nothing Like A Present
By law, the seller of the house you want isn’t allowed to give you money for a down payment. You can ask them to pay your closing costs and that is perfectly legal and common in practice, but they can’t actually provide any of the amount the house costs. You have to be able to prove to your lender that the money you’re using for the down payment is yours and that those dollars have come out of your own personal funds.
There is a way to get around this, however. It’s called using gift funds and it’s one of the most common legal loopholes you may ever come across. No one who services your loan – not your lender, or the government – can “officially” verify that this is taking place. They know it happens all the time, but there’s no law against it. Update: apparently there is legislation in the works that may override this statement, so the remaining contents of this article may no longer be feasible if this legislation is passed.
How Gift Funds Work
The process of procuring first home buying experience; not only is this an ideal setup to begin with but it does allow you to receive gift funds.
Buyer (you) and seller must agree that you are going to participate in a gift funds program. The loophole part of it works like this: the seller makes a contribution to the organization in an amount equal to your down payment, plus a small processing fee. The charitable folks at said organization then provide you with a friendly donation which happens to be in the same amount, because they care about you so much and want you to be able to afford your first home.
The benefit to the seller is that they have opened their home up to a larger pool of buyers by providing a small percentage of the sales price, which will often mean a shorter period on the market and thus a faster sale.
Gift Organizations
There are two major players in the gift funds arena, although there are probably several smaller organizations that provide similar assistance. These companies are both registered non-profits, and are the most widely known and used for this purpose. The information below will help you find out more about each one and make a decision about whether you’d like to participate in one of their programs.
The Nehemiah Program
The Nehemiah Corporation of America specializes in community development and is composed of several smaller units and affiliates. Their gift funds program has been around since 1997 and is perhaps the largest in the nation.
AmeriDream
AmeriDream supports home buyers with several initiatives including education and loss mitigation, and their first time home buyer financing program is one of the best.