Thursday, March 18, 2010

There’s been a lot of discussion regarding down payment assistance recently. Many in the housing market should know by now that FHA Mortgages, the predominant mortgage product, typically require a down payment in the amount of 3.5% of the purchase price of the home. The buyer in most cases is also responsible for the deposit of earnest money (which also serves as a portion of the down payment), funding the appraisal and the inspection, which all could add up to a sizeable amount of money. This post was written to help readers understand some of the most important parts of working with some down payment assistance programs for owner-occupants.

1. The borrower’s own GA Real Estate Agent should be the first step toward obtaining information on down payment assistance. That agent should be able to assess the buyer’s specific situation and then provide a list of participating lenders that may be the right fit. Please be mindful that Georgia Law prohibits an agent from, among other things, advising someone else’s client on the purchase of a home.

2. The down payment assistance usually is provided in the form of a second lien placed against the qualifying property for a set period of time. Georgia Buyer’s Agents should be able to provide many of the details associated with the right program for that buyer, including resale restrictions, gain on-sale recapture provisions and more so that an informed decision may be made .

3. Some Metro Atlanta Down Payment Assistance Program funds are often available year-round while others are only for a limited time. Those of the greatest demand are often depleted in mid-season, so it is important that the borrower and the agent search for properties with a sense of urgency to increase the likelihood that funds will be available to fund the down payment.

4. The GA Buyer’s Agent and the lenders to whom the buyer has been referred should have sound experience, having actually closed on transactions that involved the program of greatest interest. Both have certain responsibilities in their respective roles that will ensure a smooth transaction if executed properly.

5. Some of the Georgia Down Payment Assistance Programs require that specific language be included in the purchase and sale agreement. Knowledgeable agents know about these clauses along with the risks of entering into an agreement without them.

6. Transactions involving down payment assistance typically will take from 45 to 60 days from the date of binding agreement to close. In addition, some program agencies will require several steps of the borrower before committing to fund the transaction. Buyers, please consider speaking with an experienced Georgia Real Estate Agent prior to searching for your home. Please do not make an offer to purchase a property until you are certain that the entire transaction, including the down payment, can be funded.

7. Please have patience and understanding. Georgia Down Payment Assistance Programs are underwritten by both the lender and the program agency, each with their own documentation requirements. While the borrower should have been provided with a list of items that the lender and agency will likely request, please be mindful that more information, documentation, etc. may be requested right up to the week of closing. Please rest assured that everyone wants the transaction to close and are working diligently to ensure that it does.

8. The programs are offered to qualified buyers. They may be only available to Georgia first time home buyers and they often vary by income limits, minimum credit score limits, the borrower’s industry of employment, location of the property and more, but all of them require some form home buyer education. Your Metro Atlanta Real Estate Agent works with these programs regularly and should know which lenders offer the program that may be right for the buyer.

9. Funds will be required of the buyer in addition to the down payment assistance. The buyer will still be responsible for funding the earnest money deposit, inspections and appraisal, the latter two being non-refundable. An experienced real estate agent will help the buyer manage these expenses as much as possible.

10. Layering, combining multiple programs of down payment assistance, is discouraged unless the buyer plans to keep the property long-term. The redemption periods, the length of time that the second mortgage remains as a lien against the property before it is forgiven, vary by program. If the property is sold, refinanced or is no longer used as the borrower’s primary residence before the expiration of any one of the redemption periods, a portion of the balance may become due and payable. Further, certain programs require that a portion of the gain realized on the sale of the property also be paid to the Georgia Down Payment Assistance Agency.

11. Many down payment assistance programs do not require the buyer to disclose their use of down payment assistance. Therefore, the seller may assume that many of the concessions requested by the buyer are entirely reasonable, never knowing of the buyer’s actual advantage.

12. Experienced Metro Atlanta Buyer’s Agents will also have a back-up plan in place just in case one program will not work after all.

While not all-inclusive, these points should provide valuable insights into the use of Georgia Down Payment Assistance Programs. For more information, feel free to Contact me at 678-886-0874


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