FHA Mortgage Down Fee Details
Some borrowers get nervous when they have to make a down payment. It’s more than some have spent on one thing at once in their adult lives, who can blame them for worrying?
FHA home loans allow down payment gifts and grants and that can be of great help for the first time home buyer. The rules for these programs must include the terms of the grant or gift and under what terms a repayment may be required – these repayment terms are often triggered by a breach of the terms of the agreement.
This can also happen if the house is sold, paid off or no longer used as a main residence.
Such gifts can come from state or local housing agencies or other local institutions. Keep in mind that the FHA itself does not offer deposit support options.
Another area where your deposit could be topped up? Your seller is allowed to contribute up to six percent of the sale price of the home under the FHA loan program.
This benefits the closing costs. This will free up money that you would otherwise have to use to close the loan, and you can use that money towards the down payment. You CANNOT use seller money to pay the deposit.
What Else Do You Need to Know About FHA Loan Down Payment? There are several areas to look out for.
FHA Loan Down Payments: Always Required
Unlike the USDA single family loan program, the FHA loan program has no option without money. USDA loans are on demand and in these cases there is a clear need for a zero down option. FHA mortgages are NOT on-demand and do not require you to be a first-time buyer.
Are you thinking about applying for a one-time construction loan?
Check with your participating FHA lender about using real estate as part of the down payment. But other than that, you should expect the FHA loan down payment requirements to apply to you. It is a good idea to seek deposit assistance from your state government or local agency.
FHA Loan Down Payment Rules: Procurement Required
When you make your down payment or submit your down payment information to the lender, your lender may not be able to accept these funds as a down payment if you have a large deposit in your account that is not explained or documented.
The same applies to a down payment that comes in whole or in part from a down payment aid, i.e. a disguised loan. Instead, a so-called gift with a repayment expectation is offered.
Your lender needs clear documentation for your down payment, not only to make sure it is from an approved source, but also to make sure it is not from anyone who is not legally entitled to provide down payment assistance.
For example, your seller cannot pay a deposit. You will need to ask your loan officer which sources are acceptable and which are not, but a general rule of thumb is that an unsecured loan, credit card cash advance, or payday loan cannot be used on your down payment.