Down payment gift association programs

Occasionally, homebuyers do not have enough funds for the traditional down payment and for the closing costs to buy a home. This is the case even when can easily afford the monthly payment. The solution is simple, get help from down payment assistance/ grant programs.

A down payment assistance or grant program is where the seller, because of extra padding on the sale value of the house, can afford to contribute the up-front costs of buying a house as a gift.

The seller provides funding for the assistance, but because it is illegal to give out money, down payment assistance firms assist in the transaction. The process for obtaining down payment assistance is:

1. The seller has to sign up to an assistance program and then give funds that are equal to the assistance the buyer will receive.
2. Usually, this will involve a fee payable to the assistance program. (Usually 0.75% of the sale value of the home).
3. When the purchase is complete, the agent will receive the funds without any involvement from the seller.

While the entire program seems counterintuitive, it helps sellers find buyers who are willing to pay above or close to the sale amount of the house compared with someone who would readily have funds available. The value of the gift and the loan value of the property cannot exceed the appraised value of the home. Consult your real estate agent for specifics and any local considerations.

The lender will assist you in finding a suitable down payment assistance program.