Vanessa Calhoun

Unfortunately, I've experienced the same scenario one too many times and the end result has always been the same......an excited home buyer goes crazy over USDA Rural Development's 100% financing loan or HUD's $100 down payment program and mistakenly think that this means that purchasing a new home can be done with NO FINANCIAL INVOLVEMENT OR COMMITMENT on the part of the purchaser whatsoever!!! This couldn't be farther from the truth!!

As frustrating as this problem may be, it still falls back into the realms of an improper Buyer Consultation...As Realtors, present company included, we MUST ensure that our clients fully understand the financial commitment involved in purchasing a home...PERIOD!!!

Here's a list of bulleted points to remember when purchasing a home....

• More likely than not, you will need at least 3.5% for a down payment. FHA requires 3.5% down payment from buyer clients. I know, I know, I know....FHA only requires $100 with a HUD home and USDA Rural Development is 100% financing. Keep in mind, you're not the only person who realizes the excellent opportunity in purchasing a HUD home...finding the right property for you AND actually winning the bid has become a huge obstacle for home buyers. The USDA Rural Development Program only applies to homes within their eligibility areas.....which most likely means "out in the boonies". Having at least 3.5% down payment increases your options and make the homefinding process much easier.
• You will still need EARNEST MONEY!!!! Your earnest money deposit, in a nutshell, shows the Seller that you are earnestly interested in purchasing their home. Theoretically, when a home is placed under contract, the Seller will remove the home from the market because they've found a buyer. If the Buyer wakes up on the eve of closing and decides that they no longer want to move, then the Seller has lost marketing time and the potential of having sold their home to someone else. An earnest money deposit makes it less likely that a buyer will walk away from the deal because they've already made a financial investment in the deal. Customarily, an earnest money deposit is about 1% of the purchase price of the home. However, it is negotiable....after all, this is real estate.
• If you wouldn't buy a car without a test drive, then you WILL NEED to hire a home inspector to inspect your home to ensure that you know EXACTLY what you're purchasing....code violations, defects, and all!!! In addition to a bonafide home inspection, you'll also need a termite inspection. A termite inspection is required for FHA financing!! If your dream home was built prior to 1978, then you'd probably want to get a lead based paint inspection as well. Finally, you'd probably want to invest in a mold and radon inspection as well....My point???? Inspect, inspect, inspect. This is an EXCELLENT way to determine the condition of the subject property. Depending on which inspections you choose, you're probably looking at a cost range of $300 - $1000 dollars.
• Your lender will want to ensure that the value of your home supports the amount of money that they're lending you in order to purchase the home. They will order an APPRAISAL that will do just that! Although the appraisal is a lender requirement....YOU WILL HAVE TO PAY FOR IT! Most lenders will require the payment PRIOR TO ordering the appraisal.....this is an example of an "upfront fee".
• If you're financing through an FHA insured loan, then your appraiser will also point out potential problem areas of the home that can be hazardous to the owner, occupants, or even visitors! If these items are noted on the appraisal, then they will either need to be repaired prior to closing or paid for up front at closing and the funds placed in an escrow account. BUYER BEWARE.....most bank owned or short sale properties are being sold "as is".....defects and all. If you're in a competitive area where these types of properties are soliciting multiple offers, then your leverage for requesting that the Seller makes the repairs prior to closing has been greatly diminished! Most likely, you will have to bring the funds for the cost of the repairs to closing to be placed in escrow.

Knowing the costs involved prior to beginning the process is the best way to ensure that you're well prepared to purchase a home....otherwise, it can become a VERY stressful process!

Toodles!

You hear the news everywhere....."The stars, moon, and sun have all aligned and NOW is the perfect time to buy a new home (especially if you haven't owned real estate within the past three years)". With low interest rates AND home prices.....the conditions are optimal to live the American Dream. What else??? You can even purchase a home with as little as 3.5% down payment...Sounds pretty benign, huh??? Until you begin mentally calculating exactly what 3.5% actually computes to be. Then the panic sets in....

3.5% I DON'T HAVE THOUSANDS OF DOLLARS SAVED FOR THE PURCHASE OF A HOME, PLUS CLOSING COSTS, MOVING EXPENSES, DEPOSITS, LITTLE JOHNNY'S BRACES, ETC!.....

Then......

A ray of light shone your way via the Georgia Dream Homeownership's NSP Program and/or The Federal Home Loan Bank Grant Program!!! Then, you were told that you could purchase your new home, foreclosure or not, with down payment assistance funds to assist with home repairs, closing costs, discount points.....Suddenly, you were able to breathe again and Little Johnny's teeth would continue the straightening process! Needless to say, you purchased your home and is now living happily ever after. In fact, you were so pleased with the process, your Realtor, your mortgage broker, and the closing attorney...you felt the need to share your experience with your closest buddy.

Buddy is soooo excited about the possibility of purchasing a home that he immediately contacts your Realtor who tells him.....Unfortunately, the glorious down payment assistance program that helped your friend purchase a home has run out of money....

NOOOOOOOOO!!!!!!!!

Well, Buddy....hold on a minute!!! THERE ARE SOME GRANT PROGRAMS AND 100% FINANCING PROGRAMS THAT ARE STILL AVAILABLE TO YOU!!!! For instance, The USDA Rural Development Program provides 100% financing for owner/occupant first time homebuyers who purchase properties within their eligible areas, The Georgia Dream Homeownership Program is still providing down payment assistance up to $20,000 for first time home buyers, AND you can STILL purchase a HUD owned property for as little as $100 down with an FHA mortgage!!! In addition, many Metro Atlanta Counties has grant money available for first time homebuyers....

The key is to contact a Licensed Realtor to discuss your options and GET READY TO MOVE!!!!!

In my neck of the woods, it appears that HUD-owned properties are the hottest things smokin' since the advent of the Fourth of July cookout! These properties (especially the really good ones) are flying off of our local market and many times result in a multi-bid situation that drives the purchase price as high as 25% over list....and because of my competitive nature, I ALWAYS check to see the winning bid amount on any of the ones in which we didn't have the winning bid and I'm starting to notice something....

I'm starting to notice that a majority of the bids are now being placed by "owner occupants". In fact, one property had 25 BIDS AND NOT ONE WAS AN INVESTOR PURCHASER.......Hmmmmmm....

SOMETHING SMELLS REALLY FISHY!!!!

Are agents aware that HUD charges a fine up to a big, fat, whopping $250,000 and a prison term of no more than 2 YEARS!!!! Not only that...the Feds will investigate the buyer, the agent, the brokerage and everyone else including your grandma!!!

I'm wondering if anyone has noticed this serious violation and whether or not HUD actually enforce this policy????

Just a point to ponder......

The Georgia Dream NSP Purchase Program was created to encourage the purchase of foreclosed properties. Funds utilized are an allocation of federal dollars received by the Department of Community Affairs from the Housing and Economic Recovery Act of 2008.

The program provides $14,000 to eligible borrowers purchasing foreclosed properties in eligible areas. Funds are disbursed in the form of a second mortgage lien with no interest and no monthly payments. The lien is released over a period of five years and six months. Funds may be used for required repairs and/or down payment assistance.

This program begins April 1, 2009 and all funds must be disbursed by June 30, 2010.

How do I apply?

• All buyers must receive eight hours of in-person home buyer education/counseling provided by a HUD-approved housing counseling agency.
  
• Contact a Georgia Dream participating lender for pre-qualification and to begin the mortgage loan process. The lender will evaluate your credit worthiness based on FHA or VA guidelines and your qualifications for the program based on the Georgia Dream NSP Down Payment Program guidelines.

Frequently Asked Questions:

1. How do I locate a Georgia Dream participating lender?
   Click here and choose your area of the state for a list

2. How do I locate a HUD approved Home Buyer Education provider?
   Click here for a list

3. May I take home buyer education online?
   No. This program requires attendance at a home buyer seminar or face to face counseling.

4. Can I buy a home anywhere in Georgia?
   No. You must purchase a foreclosed property in an area of greatest need. Need was determined by the volume of foreclosed properties in a county. Click here to view the map of eligible counties.

5. Are there income limits?
   Yes. Eligible borrowers must have a total household income less than 120% of the area median income. Click here for the maximum income limit in each of the eligible counties.

6. Are only first time home buyers eligible for the Georgia Dream NSP program?
   Applicants do not have to be first-time home buyers and they are not prohibited from owning other residential real estate. However, the applicant must occupy the NSP financed property as his or her primary residence within 60 days of closing. Any rental income generated from the ownership of other residential real estate would have to be counted as household income for NSP qualification purposes.

7. If I am a first time home buyer and I use the Georgia Dream NSP program do I still qualify for the federal first time home buyer $8000 tax credit?
   Yes. If you purchase a home prior to December 1, 2009. Consult your income tax preparer or the IRS. www.irs.gov

8. I would like to use the $8000 federal tax credit as part of my down payment. Can DCA include this amount in my mortgage loan?
   No. DCA does not have a mechanism in place to monetize the federal first time home buyer tax credit for use as a down payment.

9. Can I use other down payment funds in conjunction with this program?
   No. Unlike the traditional Georgia Dream down payment programs, the Georgia Dream NSP program cannot be combined with other down payment assistance programs.

10. What interest rate will I pay on my first mortgage loan?
    The first mortgage loan will be a 30 year fixed rate FHA or VA loan originated by your lender within NSP guidelines. The rate will be determined by current market rates and the lenders choice of investor. Georgia Dream first mortgage interest rates apply only when DCA funds the first mortgage loan.

11. Can I use the Georgia Dream NSP program to purchase a short-sale or a home that is pending foreclosure?
    No. the property must have been foreclosed and the title transferred to the mortgage lien holder or an eligible agency. Eligible properties must be owned by HUD, VA, USDA, Bank, Government Entity or an eligible Non-profit.

12. Can the Georgia Dream NSP program be used to purchase a home that was a foreclosure, but was already rehabbed by an investor making the home move in ready?
    Only if the investor used a local government's NSP program to purchase and rehabilitate the home.

13. Can I use the Georgia Dream NSP program if I am also using the DCA Housing Choice Voucher Program?
    Yes. However, you must use a Georgia Dream participating lender who also participates in the HCV program. Foreclosed properties in need of repair may not be eligible for purchase. When using the HCV program the first mortgage must be a Georgia Dream first mortgage loan and will be serviced by State Home Mortgage. Consult your Rental Assistance Counselor or your participating lender for complete details.