Owning a house is a dream of most people because it gives a sense of security. This dream has become a reality by an act issued by the US government known as the American Dream Down Payment Act. According to this act, the US government will keep aside $200 million to sanction home buying grants for the low-income group. This will relieve the low-income group people of the burden of a huge down payment that they would have to make as a part of home loan.
American Dream Down Payment Act
This act was signed on December 16, 2003 by President George W. Bush. This new program is a joint venture between American government and the banks to provide grants to the home buyers of the low-income group. According to this Act, grant would be issued to an individual to meet the down payment and closing expenses of a home loan.
To be eligible for this program, you should be a first-time home buyer and your annual income should not exceed 80% of the area median income. The maximum amount granted will be six percent of the purchase value of the house or $10,000. This amount can be used as down payment and to meet all the transaction expenses associated with home buying. This program is handled and overseen by the US Department of Housing and Urban Development (HUD). Its aim is to encourage people belonging to low-income group to invest in a home.
A professional appointed by HUD would assist the buyer in the purchase of the house. Even if you have a bad credit history or an inadequate credit score, you are eligible for this loan, if you are a first-time home buyer. It is also called ‘free money’ because, you do not have to pay any interest and monthly installment on this amount.
Down Payment Gift Assistance Program
There are many who dream of buying a house but are not able to do so because of lack of funds to contribute for down payment, and also to meet the closing expenses of the deal. This problem can be resolved by applying for a down payment gift assistance program.
In this type of grant, the seller does not give down payment funds to the buyer. The seller will help the buyer in paying the closing costs of the deal. This amount depends largely on the type of loan issued to the buyer.
If a seller wants to provide gift assistance, he has to enroll his house in a concerned government program. At the time of closing the deal, he contributes the stipulated amount to the buyer as the closing and transaction fees. This deal is negotiated by a financial organization which is associated with HUD. The buyer should always approach a bank or a financial institution that is listed with HUD to avail the grant. When the deal is closed, the funds for the down payment are transferred to the account of the concerned financial organization. You need to understand, the seller has no part in the transfer of funds from the Gift Assistance Program to the bank.
Anyone who belongs to low-income group is eligible for this program. However, s/he should qualify for a home loan that allows gift assistance. If the buyer has not used the entire fund, it is returned to the program. It is to be noted that, this program cannot be used to refinance a home or to make home improvements. Also, before you apply for any grant, ensure that it is supported by HUD.