FHA Residence Mortgage Down Fee Help
Worried about paying a down payment on a home loan? There are home loans that require higher down payments than others, but the FHA loan program only requires 3.5% for borrowers with qualifying FICO scores.
FHA loan rules in HUD 4000.1 say:
- Borrowers with FICO scores of 580 or higher will qualify for the lowest down payment.
- Borrowers with FICO scores between 500 and 579 must pay 10%.
- These are FHA guidelines, not individual lender standards.
FHA home loans do not have a zero down payment option, but FHA construction mortgages allow the borrower to use real estate capital as part of the down payment if necessary.
However, borrowers do not always have to pay the down payment themselves as down payment assistance programs can help.
Here are some facts about deposit support programs:
- Local agencies offer assistance with deposit payments. You need to look for one in your area.
- The FHA itself does not offer any down payment assistance.
- Down payment programs are often offered to help with both closing costs and down payment.
The down payment assistance is available in different forms:
- Down payment grants that do not have to be repaid as long as the borrower meets the terms of the program.
- Down payment second mortgages, which may be forgivable after a certain period of time, provided the borrower meets the program requirements.
Down payment grants cannot be loans disguised as gifts. Refunds cannot be expected for a legitimate gift. Second mortgage down payment assistance should be considered carefully – make sure you fully understand the terms of the program.
Some FHA mortgages technically allow such assistance, but in the case of home loans, your participating FHA lender may not allow down payment grants or other such assistance. Otherwise, most FHA loans can include such help.
Your lender has specific procedures for accepting down payment assistance. Documentation requirements must be followed and the funds must be properly procured.
Down payment assistance (from a program or from a private individual) can come from one of the following sources:
- Local government programs
- Private agencies
The deposit assistance cannot come from the seller or any third party who may have a financial interest in the transaction. No matter where the money comes from, it has to be drawn correctly. This means that the money for your deposit (no matter where it comes from) cannot be obtained from:
- Payday loan
- Pink slip credits
- Cash advances by credit card
- Credit card “checks” that work like a cash advance
- Other unsecured loans.
Do you remember how we mentioned above that the seller cannot contribute to your deposit? The seller may contribute up to six percent to your closing costs. This means that money that you saved yourself and should have been used for other closing costs can now be used for your down payment.