Fetis,
This is done because it is often illegal, or against loan program guidelines for the seller to give money DIRECTLY to the buyer, but these loan programs require that the buyer bring some money to the transaction.
Often times this is just a numbers game. The seller DONATES the funds to the non-profit (Ameridream, Nehemiah or whatever) PLUS a processing fee. The Non-Profit than gives the buyer the cash at closing (buyer never really gets the money in their own hands) to cover the down payment. SO, the seller has either agreed to in essence LOWER the sale price by providing the down payment money to Ameridream, OR (as is the case in my agreement) the purchase price of the house is RAISED by the amount of contribution, but then the seller agrees to provide Ameridream with the DP money. In the end everything is just a wash. Make sense?
ONE CAVEAT, is that the home MUST APPRAISE for the value of the loan, so if the sales price was already at the top of the area prices, adding another 3% (or more if they are also willing to cover closing costs) sometimes will make the house not appraise and the whole thing gets nixed. But, most builders, loan officers, and realtors are pretty good at making all this work out ok..
Its all legal...matter of fact there was just a major court case on this and the non-profits won!
