As a mortgage professional, you’re always on the lookout for innovative ways to help your clients achieve their homeownership dreams. The Dream for All shared appreciation loan is a new mortgage product that could be just what some of your clients need to make their dreams a reality.
What is a shared appreciation loan? A shared appreciation loan is a mortgage product that allows a homeowner to access additional funds in exchange for a share of the home’s future appreciation. This means that when the home is eventually sold, the lender will receive a portion of the profit based on the agreed-upon percentage.
What is the Dream for All shared appreciation loan? The Dream for All shared appreciation loan is a unique mortgage product that aims to make homeownership more accessible to lower- and middle-income households. It is specifically designed to help borrowers overcome the down payment and closing cost barriers that can prevent them from purchasing a home. With a Dream for All shared appreciation loan, borrowers can access up to 20% of the home’s purchase price as additional funds to put towards their down payment and closing costs. In exchange, the lender will receive a share of the home’s future appreciation, which will be 20% in most cases depending on the borrower's income level. Here is a visual representation of what that looks like:
Who is eligible for a Dream for All shared appreciation loan? To be eligible for a Dream for All shared appreciation loan, borrowers must meet certain income and credit requirements. The program is intended for lower- and middle-income households. However, with inflation, that number is quite generous. Borrowers must also have a minimum credit score of 660 (usually 680) and a debt-to-income ratio (DTI) of no more than 45%. Additionally, borrowers must complete a homebuyer education course before closing on the loan. below is a chart with the max household income levels:
What are the benefits of a Dream for All shared appreciation loan? The Dream for All shared appreciation loan offers several benefits to borrowers, including:
Access to additional funds: The loan allows borrowers to access up to 10% of the home’s purchase price as additional funds to put towards their down payment and closing costs.
Lower monthly payments: Because borrowers are able to put more money towards their down payment, their monthly mortgage payments may be lower than they would be with a traditional mortgage.
No interest: The Dream for All shared appreciation loan does not accrue interest, so borrowers only pay back the principal amount of the loan when they sell the home.
Opportunity to build equity: By using a shared appreciation loan to purchase a home, borrowers have the opportunity to build equity and potentially earn a profit when they eventually sell the home.
Flexibility: Borrowers have the flexibility to pay back the loan at any time, either by selling the home or by paying off the principal balance of the loan.
Conclusion The Dream for All shared appreciation loan is a unique mortgage product that can help lower- and middle-income households overcome the down payment and closing cost barriers that can prevent them from purchasing a home. As a mortgage professional, it’s important to keep up-to-date on new and innovative mortgage products like the Dream for All shared appreciation loan so that you can provide the best possible service to your clients.
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