Ameridream Program Pierces “No Zero Down Financing” Myth

avatarthumbnail.jpgAnd as we continue our tour of mainstream media, along comes an article entitled “Need a Mortgage Now? Bring Loads of Cash” from CNN/Money.com.

Here’s an excerpt from the article:

These days, home buyers almost always have to make a substantial down payment, at least 5% these days, according to Rich Wordman, president of the Florida Association of Mortgage Brokers. The days of no-down loans are over.

In deeply declining markets, lenders are now reluctant to issue loans unless borrowers put at least 10% down, he said.

Zero down financing isn’t dead, dear readers. What has disappeared are the 80/20 loans, where buyers would take out a second mortgage for 20% of the purchase price to get around the requirement for mortgage insurance being included in their payment.

(And no one thought this would be a bad idea, huh?)

But zero down still is possible with FHA financing through Ameridream, a non-profit group which serves as an intermediary allowing sellers to assist buyers with their up-front costs to a greater-than-normal degree.

It’s not uncommon for a buyer to ask the seller to contribute up to 3% of the purchase price toward closing costs, prepaid items and the like – that 3% nearly always will cover all of the ancillary costs that goes with a purchase.

Ancillary costs aside, FHA loans require a 3% down payment. Through Ameridream, buyers can ask sellers to pay that 3% on their behalf. What happens is the seller makes a gift equal to 3% of the loan value to the Ameridream program, and Ameridream then passes that 3% on to the buyer. The cost? A $375 administrative fee paid by the seller to Ameridream.

HUD, in its eminent wisdom, already has tried to stop such programs in the past without success and keeps rattling its collective saber to say these programs may be stopped in the future. Why? Who knows. If sellers are willing to contribute a portion of their own equity toward the buyers’ costs in order to facilitate a sale, what is the issue?

That aside, when you see articles such as this telling you how expensive it is to purchase a home, take a step back. Zero down financing is possible if you know how and if the seller is willing to help.

[tags]Phoenix real estate, Ameridream[/tags]

Jonathan Dalton

Jonathan Dalton is a 40-plus-year resident of the Valley and has been helping folks buy and sell homes since 2004. He can be reached at 602-502-9693 or info at allphoenixrealestate.com.

0 Comments

  • Jim Little 9 years ago

    A couple of caveats are in order here.
    1. FHA is becoming concerned that too much of its portfolio are gift program loans.
    2. Just a thought, FHA now lends on a risk adjusted basis.

  • Jonathan Dalton 9 years ago

    Second part first … that’s a good thing.

    As for becoming more concerned, I don’t necessarily agree with that concern. We’re not talking about people lying on their loan applications to buy a house. These are folks who would rather take the money they’re burning on rent and invest it in a home of their own, but don’t necessarily have the 6% in hand (between closing costs and down payment) to make it happen.

    I’ve used FHA financing twice myself for that very reason, albeit without the gift program.

  • Tiffany Cloud 9 years ago

    I was just at a class last week w/the regional director for Ameridream. He stated that FHA’s current loans are using a DPA (down payment assistance) 40% of the time.

    40% of all FHA loans are using a DPA – that is HUGE! These programs are meeting a need.

    I was so bummed to see that a lot of well deserving people – you know teachers, social workers, clergy, and lots of other public servants had been priced out of a market after the 2005 boom. Now they are able to buy homes…that is wonderful!

    Just a side note, but if I had someone increasing my business by 40%, I sure would be trying to figure out a way to work with them instead of eliminating them.

  • Phoenix Real Estate | Phoenix Homes for Sale | All Phoenix Real Estate Blog » New Life for Ameridream? 9 years ago

    […] note from one of the lenders that I work with on a regular basis. It appears there may be life for seller-assisted down payment programs such as Ameridream after […]

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