Fishers Real Estate News
I am quite sure all of you have heard about the new bill the house and senate passed and President Bush signed into law recently. I am also quite sure you have already been deluged with news bits and information regarding the details of the not so stellar bailout so I will spare you the rehash of it. What I do want to cover is something that not many news outlets are focusing on…the elimination of the seller paid down payment assistance for FHA loans.
You may or may not know this, but FHA loans typically allow buyers an opportunity to get into a home with far less down payment than a conventional mortgage. That is FHA’s whole purpose…make housing affordable to more people. What you may not have know is that while the seller cannot actually pay the down payment for the buyer they can use a loophole and give a give to a third party, Nehemiah is a very popular one, and then that non-profit agency actually pays the down payment for the buyer.
This is what you might see on typically contract when a buyer is seeking the seller to pay closing costs and down payment. “Seller agrees to pay up to $3500 towards buyer’s closing costs, pre-paids, etc. Seller agrees to contribute 3% of the purchase towards the Nehemiah program.”
Essentially what just happened is the seller is now paying ALL of the buyer’s closing costs and down payment. Essentially the buyer just bought a house with $0 out of pocket. To me, this just doesn’t seem right given the current climate of the real estate industry.
Well as of October 1, 2008 this is no longer an option unless something changes. While I can really find no logical argument to defend the elimination of this loophole, it is no doubt going to hurt a very big segment of the Indianapolis market. Due to the insane tightening on the conventional mortgage market, FHA loans are in extremely high demand and Nehemiah and other programs like it are used quite often.
This will likely impact the first time home buyer market more than any other, but it could also have an impact on the first time move up buyer. If you are even considering purchasing a home using the down payment assistance program, you had better act quickly because banks are already starting to put an end to it.
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Date: Tuesday, August, 19th 2008 @ 09:30:28 AMViews: 328
This blog entry currently has 7 comments posted.
Charles Richey
Too bad so many people abused the program. It helped a lot of people get into a home that they wouldn't have been able to otherwise.
Posted on 2008-08-24 16:24:49
Jennifer in Louisville
Heh, yea the government is fairly at a loss at how to fix everything - but the ending of the downpayment assistance programs should help strengthen the overall real estate market at least somewhat. What was happening was persons were participating in the program, elevating the sales price to cover their downpayment, and getting inflated appraisals to make them qualify. This led to them essentially ending up with no real equity in the property if they did end up needing to sell.
They did provide some assistance with the up to $7500 tax credit that is available for first time home buyers - so, at least thats an attempt at not artificially inflating the real estate market prices.
Posted on 2008-08-25 12:41:36
Mark
The whole lending industry is tightening down making it harder for any buyer to get a loan. I have seen general contractors not be able to get any loans even with perfect credit.
Loan companies are just getting tired of being burned I guess.
Posted on 2008-08-25 16:53:28
Tammy
It is too bad the program got abused, but without proper oversight it will happen every time. In Myrtle Beach we're dealing with mostly short sales and foreclosures right now. It gets a little depressing, but hopefully we'll pull out of this soon
Posted on 2008-08-26 14:53:58
Patsy Snyder
Very good article. As in everything in America, though, good people suffer due to actions of those trying to "beat the system".
Posted on 2008-09-10 10:29:40
Bob McConkey
It really is to bad that this was abused so often,it really was a great program , something will be done to replace it as needed.
Posted on 2008-09-10 11:09:04
John
this has me concerned as i was planning on using FHA for purchasing a four plex.
is it me or is the government completely clueless about how to rectify the situation?
Posted on 2008-08-22 12:30:51