For many, finding first time home buyer grants is one of the biggest hurdles to jump. When you create a new mortgage, the new Loan to Value (LTV) is decided by the amount of down payment you put into the transaction.
On this page we want to explore grants and down payment assistance programs (DPA). You need to know what they are and how they work. When it comes to help with down payments, there are 2 basic kinds. First time home buyer grants are different than down payment assistance programs (DPA).
Home Buyer Grants Explained
When you think of first time home buyer grants, you naturally assume that it represents a gift or some form of charity. In a sense that is true. However, first time home buyer grants come with a little catch. In most cases (not all) there are certain limitations on grants for first time home buyers.
For example, some local agencies may be the source of the grant. What they do is put up your down payment money and then require you to pay it back when you sell your home regardless of how long you live there. Others may have time limits on how long you can live in the home. Some have 5-7 years and the grant for first time home buyers is forgiven and you never have to pay it back.
I've seen cases where the local agency used the Federal Funds and then matches them with some of their own funds. For example, the Federal Grant may be for $5,000. Then the local non-profit may match with another $2,500 for the total of a $7,500 grant. Now that's a nice gift!! In most cases it can take care of the new home buyer's down payment money depending on the price of the house.
There are so many different agencies both Federal and State that have first time home buyer grants that space will not allow us to elaborate in this article without putting you to sleep. To learn more about first time home buyer grants visit my website using the link below. At the site can find out what might be available for first time home buyers in your state.
The American Dream Downpayment Assistance Act authorizes up to $200 million annually for fiscal years 2004 - 2007. ADDI will provide funds to all fifty states and to local participating jurisdictions that have a population of at least 150,000 or will receive an allocation of at least $50,000 under the ADDI formula. ADDI will be administered as a part of the HOME Investment Partnerships Program, a formula grant program.
Down Payment Assistance Explained
Down Payment Assistance programs work a little differently. Again there are many of these agencies out there that service the entire United States. They are charities themselves. They will put the down payment on the closing table for you, however the seller will need to make a charitable contribution equal to your down payment amount plus an administration fee.
This is really not a grant for first time home buyers. You need to look at it this way. You borrow the down payment money from the lender, then give it to the seller so he can make the gift to the charity. Since this is what's called a non-interested third party in the transaction, that's what makes this legal. I call it a legal way to launder money. The lenders know how this works and as long as their guidelines allow first time home buyer grants then everything is alright.
However, the DPA programs actually are not as good as the grants because you are buying a house with NO MONEY DOWN and you'll close on the house with no equity. At least with a grant, you have some equity when you close and may not have to pay it back.
First time home buyer grants are much harder to find and may not be available in every community. You'll need to search your local charities and government agencies to find out if they offer a grant for first time home buyers.
There's also information you can purchase on how to request a grant for first time home buyers. Be careful here since there are loads of information sellers out there offering out and outdated information. Grant programs change every year. Again, there are so many different ways to make this request. Knowing how is important. You have to say and do just the right things. You need a professional to help you find the real grant programs.
If you want additional information on the process for first time home buyers, request a FREE copy of our E-Book. This E-Book has been sold ($19.95 value) and distributed over the internet for the past few years to thousands of people just like you.
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