Georgia Dreaming and Nehemiah Scheming

So let’s assume that FHA will pull the plug on seller-assisted down payment assistance (Nehemiah and AmeriDream) at the end of September… There is some chance that a new Bill (H.R. 6694) being studied by the House of Representatives will revive the program, but I would be surprised if they can overturn the recently passed (H.R. 3221) legislation before they have time to see the debacle that 3221 will produce. (I’m afraid it will take until this time next year for FHA to come to its senses and reduce the down payment requirement.)

What will be left for prospective buyers that don’t have 3.5% to put down towards purchasing a home when the FHA changes come about October 1st? Georgia Dream, offered by the Department of Community Affairs (DCA), is the next best bet for those that qualify. It is typically an FHA loan with a $500 minimum cash investment on the part of the borrower. The down payment comes in the form of an interest-free second mortgage for $5,000 or $7,500, depending on the applicant’s job type, with income restrictions. The second mortgage would have to be paid back down the road when the property is sold. There are even higher second mortgage amounts available for service men or women ($10,000) and applicants with special circumstances, such as disabilities.

The income limitations for the interest free second mortgage are based on the size of the family that will live in the house. In metro-Atlanta, here is what the income limitations look like: 1 person family: cannot make more than $39,850, 2 person family: 45,550, 3: 51,250, 4: 59,950, 5: 61,500, 6: 66,050, 7: 70,650, 8 or more: 75,200. Counties outside of metro-Atlanta range from a low of $30,400 maximum income for 1 person households to a high of about $57,350.

The Georgia Dream loan (or DCA) can either be a conventional or an FHA loan… The maximum sales price is $250,000. For the FHA version, the seller can pay closing costs and prepaids up to 6% of the sales price. The conventional version limits what the seller can pay to 3%. So FHA will be the preferred method, primarily for that reason.

DCA loan applicants must complete a HUD-approved counseling course to qualify and must be a first-time homebuyer or cannot have owned a home in the past three years unless the home they want to purchase is in a targeted area, as determined by DCA. The applicant cannot have more than $20,000 in liquid assets after closing (or 20% of the sales price). For more information on this program, call your friendly loan officer.

H.R. 6694: If you are a proponent of seller-assisted down payment assistance and would like to express your support for the bill that could save it, please visit the following website: http://www.getdownpayment.com/pdfs/hr6694.pdf to view a copy of the proposed Bill. The Nehemiah organization urges you to contact your U.S. Senators and House of Representatives and make your feelings known. Comments (pro or con) can be submitted by visiting the following website: http://www.capwiz.com/nehemia/issues/alert/alertid=11709431.

Without the repeal or modification of H.R. 3221, DPA will end on October 1st. Like the website says, “legislation that bans down payment assistance on October 1, 2008 will have a negative impact on our already struggling housing market and devastate local economies.”

How many times do we have to say it?