Posted by Ron (MD) on June 28, 2003 at 11:41:14:
Merv,
The benefit to the seller is that he may have a buyer who is qualified to purchase his house, just short of the cash he needs for closing. Most sellers would rather wait for a buyer who has other sources for the cash (besides the seller).
Most sellers won’t participate because they don’t want to contribute that much to a buyer’s closing costs. You will need to find a seller who is motivated to be rid of his house.
Ron Guy
Down Payment Grants?? - Posted by Merv
Posted by Merv on June 28, 2003 at 10:21:32:
I’m considering pursuing a down payment grant as an option to purchasing my first home and want to know if there are any pitfalls using down payment grants. You seem to be the expert based on some of your responses in the archive. What do I have to be cautious of when using down payment grants? Do I as the potential home buyer have to encourage a seller to participate and accept a down payment grant? This is where I am most confused. Thanks for any help.
clearing up a couple of points… - Posted by HTG (VA)
Posted by HTG (VA) on June 29, 2003 at 19:36:32:
As an account exec. for one of the largest down payment providers, I will try to help clear things up a bit. Ron(MD) said the grant “comes from your seller”. This would be illegal. Our funds are sent to the closing agent at least 1 and sometimes several days before the closing. Only after a successful closing, does the seller contribute the aggreed upon money back to us. It might be a technical point but it is the difference between legal and not. The only drawback to you using a grant would be if you were going to resell the home in the next 3 years or so. Most sellers will build the cost into the aggreement and with closing cost and prepaids all rolled in, it could be difficult to resell the property for enough to cover all of your selling expenses such as Realtor fees, etc. Using a grant will not cause you to pay too much because the home has to appraise for the contract price. And I know, appraisals are somewhat subjective but thats another thread.
Re: Down Payment Grants?? - Posted by Vic
Posted by Vic on June 28, 2003 at 22:36:46:
Sometimes you can get grants from the state or county you live in for the down payment. These grants are primarily for first time homeowners & there are income limitations on who can qualify.
Check with a few mtg. brokers in your area.
Vic
Re: Down Payment Grants?? - Posted by Ron (MD)
Posted by Ron (MD) on June 28, 2003 at 11:06:27:
Merv,
Most down payment grants (e.g., Nehemiah) are not true grants.
In fact, the grantor gets the “grant” from your seller.
Normally, these “grants” are used to get around the FHA limit on the amount of the buyer’s costs that can be paid by the seller. FHA allows the seller to contribute 6% toward the buyer’s costs. If the seller wants to contribute even more, he “donates” the money to the grantor (plus a fee that ranges from $600 to 1% of the total loan amount). The grantor then gives the buyer the grant at closing (less the fee).
So, to get the grant, you must have a seller willing to pay for it. Sometimes, the “grant” amount can be added onto the sale price of the house, but the house must appraise for the full sale price (including the grant).
Ron Guy
Re: Down Payment Grants?? - Posted by Merv
Posted by Merv on June 28, 2003 at 10:57:04:
If my message seems confusing it is because I had sent it via email to someone, and that person suggested that I post it to the board. I should have previewed it before posting, anyway, I could have changed the wording a bit.
Re: Down Payment Grants?? - Posted by Merv
Posted by Merv on June 28, 2003 at 11:23:43:
Thanks Ron. What I’m having a hard time understanding is how does this benefit the seller? Does this mean that I will have a tough time finding a seller that is willing to be involved in the down payment grant process?
Merv, thanks for posting on here… - Posted by Houserookie
Posted by Houserookie on June 28, 2003 at 18:38:44:
I get a lot of repetitive questions asked via private email so this saves time.
Everything said thus far is correct. As a buyer, you can use down payment grants to work in your favor. Find a seller that can’t sell and offer to buy at a low price. Don’t mention anything about the grant until your offers are accepted.
I generally use down payment grants as a way to get top price because most sellers are not aware of them.
“He who knows more…takes home more”.
Cheerz,