Important Message Regarding AmeriDream And All Non Profit Down Payment Assistance Programs
President Bush signed the Housing and Economic Recovery Act of 2008, HR 3221on July 30, 2008. This law eliminates down payment assistance programs from companies like AmeriDream, Nehemiah and other DPAP's effective Oct. 1, 2008. See Mortgage Reform Law To Eliminate Down AmeriDream and DPAPs.
Ameri Dream or Nehemiah, what are they and what is the difference between them? Both Ameri Dream (actually spelled AmeriDream) and Nehemiah are down payment assistance programs. Down payment assistance programs are also known as DPA's. Each of these programs enables folks with little money for down payment or closing costs to buy a home provided that they qualify for a loan. Typically, the only loan programs that allow the use of these two programs FHA home loans.
FHA Loans Allow Gifts For Down Payment And Closing Costs
In any home purchase transaction you must be able to come up with down payment money and money for your closing costs. Closing costs are the costs associated with the loan, title search, appraisal, underwriting fees, discount points, origination fees etc. See GetPreQualified.com’s articles on Good Faith Estimates to get a more thorough breakdown of these costs and what you should expect to pay.
For home purchase loans with Fannie Mae and Freddie Mac, called conventional loans, you are required to have at least 3-5% of the sales price for down payment. You must prove that this money is yours. The only time that you don’t have to prove it is your money is if you were given at least 20% down payment from say a parent or close relative. In most other cases you will have to show that this money is yours and has been in your bank account at least 60 days.
For home purchase loans with FHA, you still have the requirement for 3-5% down payment, but in this case, the money can come in the form of a gift from a parent or close relative. For FHA loans you do not have to have the 20% gift like you do with Fannie Mae and Freddie Mac.
Down Payment Assistance Programs - AmeriDream and Nehemiah
Given that FHA allows the down payment to be gifted, the companies: AmeriDream, Inc and Nehemiah, Inc were started as nonprofit organizations to offer gift programs from them to homebuyers who have little or no money for down payment or closing costs. The money that they gift to a buyer comes from the seller of the home. The seller of the home would have to agree in the sales offer and contract to provide closing cost assistance to the buyer to use this program.
The seller will give to the DPA Company enough money to cover the amount of money that is gifted to the buyer from the DPA Company. This all gets done at the settlement or closing when the home is bought and exchanges hands between seller and buyer.
Chances are, if you use this program, you’ll never even know about the transaction except to know that you are using it. You will also have to complete some sort of minor upfront home buyer education program no matter which company you decide to use.
What Is The Difference Between AmeriDream and Nehemiah?
Both the AmeriDream and Nehemiah programs work nearly identical to each other. They have to play by the same rules as FHA, the IRS and other governing factors strictly dictate how these programs must work. In fact, there is some question as to how long these programs will be around given the mortgage crisis of 2007 (we won’t discuss this topic in this article).
There is one slight difference between these programs. This difference has to do with how much money each program will gift the home buyer. Nehemiah will gift the buyer of a home up to 6% of the sales price of the home. This money is to be used for either down payment money and or closing costs. AmeriDream will gift a buyer up to 10% of the sales price of the home.
These programs both serve a great purpose, they help people who do not make a lot of money but still qualify for an FHA loan become homeowners. This is incidently one of the missions of FHA, to help more Americans own their own homes. If you are a first time buyer or buying a new home to live in, and you do not have much money for down payment or closing costs, check out these programs. You may find out that you can get the break you were looking for to buy a home.
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