Down payment assistance programs were designed to help prospective homeowners come up with enough money to buy a property. FHA mortgages will fund up to 97% of the purchase price. However, borrowers must come up with the remaining 3% as well as any closing costs.
New Laws Eliminate Down Payment Assistance
Prior to July 30, 2008, FHA borrowers could participate in down payment assistance programs. These services helped borrowers generate up to 6% of the home’s value for closing costs or a down payment. This money was generally funded by non-profit organizations such as AmeriDream, American Family Funds, and Grant America, working together with the seller.
In July 2008, however, the Housing and Economic Recovery Act of 2008 made seller-funded down payment assistance illegal as of the following October. The above non-profit organizations are no longer able to help new borrowers with down payment assistance.
How to Bring Down Payment Assistance Back
A new bill, H.R. 600, proposes to make down payment assistance programs legal again. Supporters are currently asking that the public write Congress expressing their support.
See Also:
How to Qualify for an FHA Mortgage