Down Payment Assistance Alternative to Nehemiah - CHDAP
scottsent August 20th, 2008
CHDAP IS A USEFUL
ALTERNATIVE TO NOW
PROHIBITED NEHEMIAH
PROGRAM
If you’ve been reading my posts, you are already familiar with the Nehemiah Program. It’s the down payment grant/assistance program many first time buyers attempt to use when buying a home with -0- cash down.
To recap, the Nehemiah program involves getting the seller to pay your down payment, usually around 3-6%, through a loop hole in the law that allows them to indirectly pay by making a donation to a non profit organization, which in turn pays your down payment.
New FHA loan rules prohibit using the Nehemiah program after Oct 1st. However, all is not lost for the would be home buyer looking for a break.
It seems there is another down payment assistance program that is still available. It’s called the California Homebuyer’s Down Payment Assistance Program (CHDAP) and it’s offered by the California Housing Finance Agency.
Some lenders also refer to this as a ’silent second’ . However, since most sellers these days will require proof of funds to cover your down payment, I believe disclosing this loan program during the offer is the most honest way of approaching it. Because if the buyer later gets denied, he/she/they will have alot of explaining to do if it wasn’t disclosed during negotiations.
For more details about the program, visit their site at:
http://www.calhfa.ca.gov/homeownership/programs/chdap.htm
While this program exists, it’s not without it’s pros and cons, much like the Nehemiah program. Many lenders will tell you about the existence of a myriad of programs aimed to benefit you. However, in practice, negotiating a home purchase with too many ‘what if’s’ can make it nearly impossible to get an accepted offer. The more specialized a loan program, the more hoops you need to successfully jump through.
For example, bank sellers in a foreclosure market want to unload the home as soon as possible. They list at near market value and wish to sell as-is. Simple conventional loan based offers will naturally be stronger than an FHA loan with CHDAP program. The more specialized loan programs, the longer it generally takes to close escrow. Since banks want a fast close, they may accept another buyers conventional loan based offer over a CHDAP program.
Likewise, with more people seeking out buyer assistance programs, combined with the uncertainty in the housing and lending markets, the authorities who issue CHDAP approvals will be under more and more scrutiny, and will seek out reasons to reject an application.
After speaking with another mortgage broker colleague about this, they stated “Ahhhh CHDAP we do it as well now….. keep in mind it sometimes takes forever to close if it does we had a horror story one a month ago they (chdap) approved it then denied it at the end of the transaction… NOT GOOD thank God that was not my loan….I’m hearing through the grape vine they are looking for every reason not to approve loans. Now if these clients are super clean and have good credit you may not run into any problems just plan for a 45 day or so escrow.’
So, just keep in mind that while this may be an alternative the Nehemiah, it’s no silver bullet either. In many ways, saving up for a down payment may make more sense for many who want a little more leverage during negotiations.
Being in a weak qualifying position generally results in having to settle for homes that are passed over by the majority of buyers, having to offer more for that same home, and generally hoping the bank seller will be willing to go along with everything (including repairs) the lender requires. That makes for a bit of an emotional rollercoaster due to all those uncertainties.
In an era of tightening lending standards, those who qualify least will have to work much harder to get anyone to accept their offers, and to get into a home in a timely manner.
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