Let me explain how Ameridream and similar organizations like Nehemiah work. If anything I write is factually incorrect, I apologize and I'm sure someone will correct me.
You have a house you want to buy. Let's say it costs $100,000. You can't afford a down payment. The bank won't give you a loan. The seller of the house must agree to work with you and Ameridream (or Nehemiah, or whatever). Some sellers won't even agree to this. The ones that do acknowledge that they will provide Ameridream with your downpayment, plus a processing fee. NO SELLER is going to provide you with $3000-$10,000 (the usual required down payment on a $100,000 house) out of the kindness of their heart. NOBODY. What ends up happening is they raise the selling price from $100,000 to $100,000 plus whatever they are paying Ameridream.
Now let's think about this for a second. You are now going to sign a mortgage with your bank for an amount that is HIGHER than what the house is worth...by at least 3%. You are starting out your life in that house with NEGATIVE equity.
Now, you might not mind taking that risk. That's fine, for some people. But in this economy, you have to think about how long it will be until you feel "safe" again financially, considering that in the first few years of a traditional 30-year mortgage very little of your monthly payment goes into paying down the principal. In other words, it will take you some years to climb out of the hole you've dug.
Now compare that experience with having a 10% down payment you can provide yourself. No hole to dig yourself out of. In fact, you've already acquired equity.
Now which of these two scenarios seems more fiscally responsible to you?
Listen to the mortgage lenders and real estate professionals all you like. Many of them have great advice. However, you don't have to take everything they say as Gospel. some people will try to sell you anything. You have to be careful.
Do yourself a financial favor and rent for a year or so. Don't rush into buying a house with the hopes that Ameridream will pick up your slack. Many times, they won't. You should save up enough so that you're able to put down a nice, healthy 10-15% down payment--on your own. That might not be the answer you want to hear but its what I and millions of other people had to do.
FHA or VA is the way to go, but these must be owner occupied properties (i.e. not investments).
You may by:
1) You can get a gift downpayment from family to cover the required 3.5%.
2) Seller can contribute up to 6% to your downpayment
3) Nehemiah downpayment, no-repayment - Seller signs contribution document. find out more at http://www.getdownpayment.com/hec.cfm
And yes, it is true you will have to show reserves. Meaning, you have to have that money in your account to prove you have the downpayment. But depending on the deal, you should get it back as credit/check at closing.
If you can afford to buy a home, YES I would advise to do so as rates are very low 5.25%.
Just make sure it is a loan you can handle. A good loan officer should help you with the guidelines and affordability ratios.
As of 1/1/09 you need 3.5% down for an FHA loan. Yes you can get up 6% towards closing costs and prepaids. But your buyers still need to have 3.5% sitting in the bank. Now these are the guidlines from FHA, however some lenders may have overlay guidelines, so you do need to check with your buyers lender. I believe the whole 3.5% can be gifted. And then yes a 6% credit. But more then likely they are going to want to also see reserves for the buyer.
I want to ask, with FHA loan I thought you were allowed up to 6% contribution from Seller and the 3% can also be "gifted" from family or not-for profits as you mentioned.
Please clarify if I am wrong.
As, always you get my thumbs up!!
Loved your comment about online lenders! Here are a couple of blogs for your database.
I suggest you find the best local Realtor you can and ask them to give you their most helpful, counseling-type loan office contact.
Which means the chances of getting a 100% LTV mortgage will soon be somewhere between slim and none.