Down Payment Assistance Program
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DOWN PAYMENT ASSISTANCE
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Builder 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 much of their own money does a buyer need to buy a home using the Program?
NONE.
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How does the builder benefit by using Newsong's Down Payment Assistance?
By using the Newsong Down Payment Assistance Program, a builder can market a home to a much larger group of prospective buyers than a home that does not utilize the program. There are numerous people who want to buy homes, have the employment and credit to qualify for loans, but do not have the funds necessary to buy homes. Down Payment Assistance can bridge this gap. Typically it can take weeks or even months to sell a home. Most builders are anxious, often reducing their prices and making other concessions in the process of selling their homes. It is common for a builder to negotiate (or drop) the sale price in order to make a sale. Many builders drop their price by 3%, 5% or even more. With Down Payment Assistance most builders are able to obtain full listing price for their homes, and make a sale faster.
How does the builder participate in the Newsong's Down Payment Assistance Program?
A builder participates in the Program by agreeing to the Newsong Purchase Addendum, and a donation equal to the gift amount given to the buyer plus $540 after closing. For example, if the gift amount is $7,000, the builder donation fee is $7,540. A builder is committed to a donation only if a homebuyer utilizing the Newsong Down Payment Assistance Program purchases his home. The closing agent will disburse a builder donation only after a successful closing of sale of the home through escrow.
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Will it cost me more money to use Newsong's Down Payment Assistance Program?
Generally the first thing the lender and real estate professional do in order to qualify a buyer is to look at reducing the sale price of your home. Even if they reduced your home's sale price by $10,000, it would not make that much difference in a buyer's monthly payment or required down payment. We can show the lender and real estate professional how, by using the Newsong Down Payment Assistance Program to get full market price, everyone wins. Now clients can take advantage of the flexible credit standards of FHA, which make it much easier for cash-strapped buyers with a few credit slips or high ratios to qualify for a loan.
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How do I sign up for the Newsong Down Payment Assistance Program?
You don't need to sign up to use the Newsong Down Payment Assistance Program. To get started, simply download or print the required forms and the marketing material from our website. This is all you need to get started. It's that simple.
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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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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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What do I need to do for a buyer to get Down Payment Assistance gift funds?
Determine the amount of gift funds the buyer will require. Send the signed Newsong Gift Funds Request, Home Buyer Gift Certificate, Newsong Purchase Addendum, and sales contract with "Newsong gift" notation to the Newsong Program 24 hours before closing. It is the responsibility of the lender and Realtor to conform to and meet all conditions and requirements of the Program before we can arrange and/or release down payment gift funds for a buyer. If your lender and builder clients are not familiar with the program, please direct them to our website, or have them 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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How are Down Payment Assistance gift funds transfered at closing?
Once the required documents have been received by the Program, a notice to fund is faxed to the loan officer, and the settlement agent is contacted to go over our closing instructions. Gift funds are wired to the settlement agent 1-3 days before closing. After closing, the settlement agent disburses a seller donation to the nonprofit organization, and the pool of funds is replenished for future grants.
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What approach should I take in marketing a home with Down Payment Assistance?
Simply market the home as "available for no money down." There are thousands of potential homebuyers out there who have the income and credit to qualify for a home but they lack the down payment necessary. Now with the Newsong Program, you can offer homebuyers the money they need to purchase a home and become part of the American dream. Offering free gift money to your potential homebuyers is the easiest sale you will ever have to make!
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How do I explain the Newsong Down Payment Assistance Program to a buyer?
First, let the buyer know that the seller needs to participate in the program in order for it to work. The seller does this by paying a fee equal to the down payment plus $250. Explain that this is not a contribution to the buyer. The fee charged to the seller simply replenishes the program fund, so that those funds can be used for other homebuyers in the future. Since the seller needs to contribute to the program fund, the buyer must understand that the seller will not negotiate as much with them as they would with a cash buyer.  Chances are, the seller will want the full list price or something close to that. However, the buyer doesn’t need to be concerned that he isn't getting the lowest price possible. First, he is getting a property that is selling for what it is worth. Second, he will achieve a tax benefit, appreciation on the property and the ability to buy the home at a lower price now, than at sometime in the future.
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What is a Participating Down Payment Assistance Home?
A Participating Home is a home in which the Seller has entered into an agreement with the Newsong Fund. The Newsong Purchase Addendum outlines the donation fee the Seller makes to the Newsong Fund and its use.
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Where do the Down Payment Assistance gift funds come from?
Funds are raised by the foundation through generous donors who believe in our cause to promote affordable housing. Also, the program donation fee paid by the seller ensures the viability of the Newsong Down Payment Assistance Program so that we can provide future gift funds to people who need down payment assistance.
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Isn't the builder just paying the buyers down payment?
NO: Prior to recording, the Newsong Down Payment Assistance Program wires the buyer's gift money to the closing office. This gift comes from an existing pool of funds. The contribution that the program receives from a builder is NOT used as a down payment assistance for the buyer of that particular builder's property. The builder makes their contribution to the fund only AFTER the successful closing.
How is this written into the sales contract?
Add to sales contract "This sales contract is contingent upon the buyer receiving up to a ______% or $___________ gift from the Newsong Fund." Fill in the Purchase Addendum with seller property information, the buyer’s name and the amount of the donation fee to the seller.  Then, have your seller sign the form and attach it to your contract. It's important for the lender and the Realtor to work together prior to presenting the contract, so that the appropriate fee can be inserted based on the needs of your mutual client.
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Are homes overpriced to accommodate the builder donation?
A builder'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 is an eligible Loan Program?
An eligible loan program is any home mortgage loan that allows charitable organizations to provide Gift Funds to a buyer for use towards their down payment and/or closing costs. FHA guidelines allow a gift from a charitable organization (such as Newsong) as an acceptable source of borrowers "Funds to Close" (HUD Handbook 4155.1, Rev-4, Chg-1, Para. 2-10C).
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What tips can you offer to truly maximize the use of Down Payment Assistance?
1) More homebuyers will call for homes advertised for no money down, 2) sellers can net the same amount whether they sell the home through the Newsong Program or not, 3) if a home you have listed doesn't sell right away, offer the home with the Newsong Down Payment Assistance Program and advertise it for no money down rather than reduce the sale price to provide incentive, 4) potential homebuyers are less likely to shop for a real estate agent who can offer free gift money, 5) it's easy to use, and a true win-win-win situation.
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