The Ameridream program and similar programs are designed to provide downpayment assistance to low and moderate income families. They receive their funding through donations made by sellers. Organizations like Ameridream then "gift" a portion of the sellers donation to the buyers. This gets around the rules most lenders have limiting seller contributions directly to the buyer. You may be asking why lenders would be opposed to this. Here are two reasons. Lenders want to see the borrower put something at risk so they would be less likely to default on the loan. A substantial investment made by the buyer reduces the liklihood that a borrower would simply walk away from the home if they run into financial trouble. Another reason is that seller contributions have potential to artificially inflate property values. Heres how. In order to convince a seller to contribute to the buyers downpayment or closing expenses the buyer will offer to pay more for the home to offset the sellers contibution. As long as the lenders appraisal supports the higher price the deal goes through. That sale now becomes a "comp" used to justify the price of other similar homes for sale in the area. If the home goes into foreclosure the lender will not be able to recover their investment through the sale of the home and will end up taking a loss. Although this is not the single reason the country is experiencing record forclosures and the mortgage "crisis" we all now face it is certainly a part of the problem. This is what prompted HUD to enact regulations prohibiting seller funded downpayment assistance. Ameridream has since won a lawsuit against HUD preventing implementaion of the regulation. However, the U.S. Senateâ€™s proposed housing stimulus package includes a provision that would eliminate the seller funded contributions Ameridream uses to provide the assistance to the buyer. As of now Ameridream is still operating so if you intend to take advantage of the program I suggest you do so soon. For more information on the program visit http://www.ameridream.org/Programs/DPA/Homebuyers/ . If you plan on investing in a second home in Jacksonville, FL I would be happy to help you. Good luck and happy house hunting.
I am sorry to hear about your experience with AmeriDream as that is not the way things should flow. Based on experience this is a good vehicle for the right situations and should have been explained to you so you understand. Typically, the lender is the one the one to explain how it works. AmeriDream and Nehemiah as well as others have representatives that are in the field helping people understand the programs.
The AmeriDream and others like it are insitutions that gift money. This gift can be used as down payment assistance and closing costs. There is a fee to the seller as well as the costs of the gift. In addition the home must have an appraisal that will work within the specific home and gifting desired.
We utlize these programs on a regular basis as they have helped many people with down payment assistance. This programs and others like it work in conjunction with support from the seller and are utlized in conjunction with FHA loans.
The loan limits will vary based on where you live and FHA new guidelines. The amount of the gift can 1% - 10% and with some other gift programs have been able to get it even higher up to about 12%. When I reference the higher percentages these have been applied when working with builders and not many ocassions with a seller.
The comments from Lucien are a good overview as well. The programs are pretty basic as long as you have a willing and motivated seller. The links to AmeriDream and Nehemiah are good information as well. Last month we did about 9 Nehemiah gifts with builders.
If you have any questions please do not hesitate to contact me and will be happy to address any questions you have.
First Horizon Home Loans
11300 4th Street N
St. Petersburg, FL 33716
Office: (727) 576-5776 x1129#
Fax: (214) 486-2347
Cell: (727) 599-8200
Also Look at the Nehemiah Program http://www.getdownpayment.com
Asap Mortgage & Investments Inc.
Mortgage Banker/Correspondent Lender
Approved FHA Lender
Apply on Line @ http://www.asapmortgage.org or http://www. asapmortgage.com.web-loans.com/