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Frequent Down Payment Assistance Program Questions
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What is Down Payment Assistance?
Typical home loans allow the 3% down payment required by the buyer to come from one of three sources: buyer's funds, a gift from a relative, and/or a gift from a charity or public entity. In any of these cases, the down payment cannot be a loan or require any type of repayment from the buyer. These funds must be a gift. This is where Newsong Assistance comes in. We have set aside funds to help home buyers. Eligible loans such as FHA allow a gift from a charitable organization (such as the Newsong Program) as an acceptable source of borrowers "Funds to Close" (HUD Handbook 4155.1, Rev-4, Chg-1, Para. 2-10C).
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How does the seller benefit by using Down Payment Assistance?
By using Down Payment Assistance, a seller can market a home to a much larger group of prospective buyers than sellers who do not utilize the program. Millions of people want to buy homes, have the income and credit to qualify for loans, but do not have the funds necessary for the down payment and closing costs. Newsong Down Payment Assistance bridges this gap. Typically it can take weeks or even months to sell a home. Most sellers reduce their prices 7-10% or more and make other concessions in the process of selling their homes. With the Newsong Program most sellers are able to negotiate a better price and sell the home faster.
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How does the seller participate in Down Payment Assistance?
Sellers will contract for up to full market value and offer buyers the option of consolidating expenses and down payment with Newsong. The seller in turn replenishes the Newsong Fund equal to the gift amount plus a modest administrative fee after closing. Sellers receive what they expect and buyers get the cash they need with no out-of-pocket expenses. A seller is committed to a donation only if a homebuyer utilizing the Program purchases the home. The closing agent will disburse a seller donation only after a successful closing of sale of the home through escrow. There are absolutely no out-of-pocket expenses.
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Are homes overpriced to accommodate the seller donation?
A seller's home can sell for full market value. It is less likely that a seller will need to accept a reduced offer for their property. Market value is then confirmed by a URAR appraisal to ensure that the home is not overpriced. The appraiser must substantiate the value of the home based on sales of comparable properties. The price of a home cannot be higher than its appraised value.
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What does a buyer need to do to get gift funds?
Simply print the Gift Certificate and Purchase Addendum, and then give them to your Realtor and/or mortgage lender. Newsong Down Payment Assistance Program can recommend lenders and Realtors who use gift funding routinely. Talk with your Realtor and lender and inform them that you would like to purchase a home using the Newsong program. If the Realtor or lender that you use is not familiar with the program, please direct him to our website to download the Start Up Kit or have him/her contact us for information at (918) 254-6999.
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What determines the maximum gift amount for Newsong's Down Payment Assistance?
Besides our limit of $50,000, the key ingredients are the loan amount a buyer will qualify for, home value, and seller particpation. Instead of a seller reducing the price, making improvements, paying concessions, or waiting to sell a home, full market value could be used for a buyer's down payment and closing costs while the seller receives the desired sale price. If a buyer is trying to obtain a larger grant, he may need to find a distressed home in order to give the seller sufficient room to pay the donation fee.
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What makes a buyer qualified for the Newsong Down Payment Assistance Program?
A buyer is automatically qualified for a gift from the Newsong Down Payment Assistance Program when they are obtaining financing through an eligible loan program, and are purchasing a home where the seller agrees to participate. The Newsong Program does not have any qualification requirements other than that a buyer must be approved for a loan from a lender who accepts gift funds for use as a down payment (such as FHA), and that the seller participates in the Newsong Program to assist the buyer in buying the home. In other words, if a buyer is approved for a loan he is automatically eligible for a grant from the Newsong Program as long as the seller of the property will participate in the Newsong Program. If the Realtor or lender that you use is not familiar with the program, please direct him to our website, or have him contact us for information on this exciting opportunity.
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Will The Down Payment Assistance Program work with non-conforming loans?
Yes, if the lender allows gifts or non-sourced money for what you are requesting the funds for. A typical non-conforming borrower may be qualified for 80% or 85% loan-to-value, but in most cases, the lender may require only 5% to 10% of the down payment to be sourced. The remaining 5% to 10% could come from the foundation, but you should check with each lender on his policiy.
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Does the Down Payment Assistance Program require underwriting of the buyer's loan?
No, we do not have any additional loan conditions. Once the lender has approved the purchaser and the property for the loan, we will provide the source of down payment as needed, and as agreed to by the seller. We do not require seeing the approval or any part of the guidelines, appraisal, or home warranties. If the lender is able to fund the loan we believe all guidelines have been met.
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