Should I use Down Payment Assistance, Am I understanding this right?

[Anonymous]

Hi, I just had a long talk with my lender regarding Down Payment Assistance.. I am getting my loan through Wells Fargo and Down Payment assistance through Genesis.

Here's the different scenarios:

Without using DPA
Purchase price of the house = $186,400
Down Payment = $5,580
Financed Amount= $180,820
Seller gets $186,400
Finance institution gets: Interest on the $180,820 loan

Using DPA (HOW I THOUGHT IT WORKED)
(Increased)Purchase price of the house = $192,474 = (186,400 + 300 fee) / 0.97
Down payment = $5,774 = ($192,474 *.03) = money coming from the increase of the price of the house
Financed amount = $186,700
Seller gets = $186,400
Finance institution gets: Interest on the $186,400 loan

If my numbers are correct the difference when using DPA is that I would be paying interest of $5,774 over 30 years PLUS 300 fee.

And here's what the Lender is telling me:

With DPA
(Increased)Purchase price of the house = $192,474 = (186,400 + 300) / 0.97
No real Down payment being made to anyone
Financed amount = $192,474 (HIGHER THAN THE 100% OF THE ORIGINAL PURCHASE PRICE)
Seller gets= $186,400
Finance institution gets: $5,774 PLUS the Loan is $11,654 higher than with no DPA so Interest on the $192,474 loan

If the Lenders numbers are correct the difference when using DPA is getting a $11,654 loan (almost twice the amount of down payment required) PLUS interests on $11,654 over 30 years PLUS $300 fee Is this correct???

Is there any reason I should consider Down Payment assistance?

Message Edited by ppcorrea on 03-12-2008 03:38 PM

[Anonymous]

I just am adding my two cents, but I thought they financed a higher amount, and the seller "sells" it to you for that amount, 192,474... but the kicker is that your bank wants a "down payment" on the loan, so in the purchase agreement the seller "agrees" to give you or pay upon your behalf $5774 to the loan immediately. 

So the financed amount is 192,474 but the balance is reduced to $186,700 immediately, leaving you with that amount to pay and still getting a "down payment" on the house.

Just nothing out of your pocket.

[Anonymous]

I talked with a representative of the Genesis DPA program and she told me that my view wasn't exactly right as I actually needed to get a loan for the 192k but the loan amount would decrease almost immediately as soon as the title company released the down payment contribution, making it pretty much the 186k I was expecting.

I told this to my lender and he still told me I was wrong and the loan would be for 192k which would be 100% financing on the new purchase price (which I believe is against FHA regulation). And the 5,774 paid by the title company to the lender would not reduce in any way my loan.

[Anonymous]

I hate to be rude and say this, BUT FIND YOU A NEW LENDER.  Might I recommend CTX Mortgage?  I am single and just bought a townhome last September using Genesis Foundation's DPA program.  They were great.  Getting an FHA loan with DPA would be the way that you would want to go.  FHA not being score driven and less than 3% down payment makes it the way to go.  What the one individual told you is correct.  The biggest thing to make it work is that the home MUST APPRAISE for the $192,000 in your case. 

I hope that makes sense.  CTX Mortgage made it happen for me!