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Daily Real Estate News | October 1, 2007
FHA Prohibits Seller-Financed Charitable Down Payments
The Federal Housing Administration is prohibiting its borrowers from relying on down payments financed through charities that are in effect paid for by the seller.
These programs, which often are run by legitimate charities, have helped thousands of people buy homes.
Home sellers give a donation to the charity equal to the down payment and the charity funnels it to the potential buyer. Then the seller recoups the money by charging a higher price for the home, usually equal to the down payment.
The Government Accounting Office found that buyers receiving assistance from the charities are more than twice as likely to default or become delinquent than other FHA borrowers.
Source: The Wall Street Journal (09/29/2007)
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