Friday, March 13, 2009

First Time Home Buyers

The Nehemiah Corporation believes Congress and President Bush will ban its down-payment assistance "gift" program within days as part of the $300B FHA bailout bill, Nehemiah President and Chief Executive Officer Scott Syphax acknowledged Monday.

What does this mean? NO MORE DOWN PAYMENT ASSISTANCE (DPA). The Nehemiah gift was a way for many first time buyers to purchase homes with no money down. It is unfortunate that this will no longer be an option. HOWEVER, there is an alternative. Right now, participating sellers typically credit 3% towards a Nehemiah "gift" plus an additional 3% towards buyer closing costs (up to 6% total) - where 3% is hardly enough to cover closing costs for an FHA loan. Although DPA is soon to vanish, sellers can still assist buyers by crediting a full 6% to closing costs instead - where a majority of that would go towards a rate buy down on the loan. Although buyers must now come up with 2.5%-5% of their own money, if the "would-be gift" were instead used for such a buy down, the monthly payments on the loan would be substantially lower. Basically, if a seller credits the same amount to the buyers closing costs instead of routing the funds through Nehemiah as a Gift, buyers would save much more in the long run through lower monthly payments and reduced compounding interest.

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