The AmeriDream program is being pulled, but a new USDA program is taking it's place. I believe Buyers are allowed to ask for up to 7% in closing costs and Buyer's can still come in with 0 downpayment.

There are still a few banks (including Pacific Coast Mtg.) that are still participating in DPA. The problem is a majority of bank owned properties and REO's are not accepting DPA because they don't believe the loan will close before the deadline. However, there are two deadlines and i think some of the banks are confused. You must have full loan approval before September 30th to qualify for DPA. Your loan must fund before October 31st. Some bank owned properties and REO's are using the 30th of September as the deadline, and because of that they are not accepting anymore offers that include the DPA.

HR 6694, currently in committee would "reverse" (sort of) the bill that kills seller funded DPAs by allowing for "risk based" premium prices (based on FICO). Some are saying it will pass in time, some not. It's the government, so who knows.

You probably knew already, bu the down payment amount also increases Oct. 1 to 3.5%.
Good luck!

Hi Lylahill,

You are correct that no REO's will accept seller funded DPA's for financing. The main reason is that as of October 1st, seller funded DPA's (Ameridream,Nehemiah,etc.) will all become illegal because of a new law.

So, you will not find any REO's or even and mortgage lenders that can participate so close to October 1st, because you won't have enough time to get the transaction done.

---
Paul Welden
HomeSmart

Lender answer:

If your client intends to use seller-funded down payment assistance in combination with an FHA insured loan, you will need to advise your client that effective October 1, 2008, HUD has banned any down payment assistance programs in which the seller or other party to the transaction has a financial interest. This ban was part of the landmark FHA Modernization Act passed as part of the American Housing Rescue and Foreclosure Prevention Act of 2008.

Fannie and Freddie have never allowed a seller to contribute to a buyer's down payment (to do so is considered fraud by Fannie & Freddie), so conventional financing is out as well.

The following is a list of HUD's approved down payment sources for borrowers using FHA insured loans:
1.) Borrower savings
2.) Gift from immediate family member
3.) Grant from charity (eg Catholic Charotoes of America)
4.) Proceeds from sale of prior home
5.) Government grant (eg S.H.I.P in Florida or American Dream Grant from HUD)

It may be possible for your client to use a 100% loan from VA (if the buyer is an eligible veteran) or YS RDA (if the property is lcoated in a rural area).