FHA Mortgages

Who Could Contribute To My FHA Residence Mortgage? Social gathering Contributions


Who can contribute to my FHA home loan? This is a question many want to know, and the answers don’t always point to the most obvious type of contribution the borrower can seek – the required down payment on the FHA mortgage loan.

How much and in what areas can a prospect contribute to the borrower’s FHA mortgage?

FHA loan rules on this topic can be found in HUD 4000.1, the FHA Loan Guide for Single Family Home Mortgage Loan Transactions. First of all, it should be noted that down payment sources are strictly regulated and must come from a verifiable source that the lender can investigate to ensure that FHA loan rules have been followed.

Generally, down payment contributions cannot come from interested parties to include “sellers, estate agents, builders, developers or other parties with an interest in the transaction” under FHA loan rules. At this stage, the borrower may feel that the prospects mentioned here have NO cash to contribute to the transaction.

But that’s not true. It just cannot come in the form of a down payment gift or loan from the prospect. What CAN a prospect add to your home loan?

The FHA loan rules in HUD 4000.1 are precise – there are a variety of applications for such contributions (see below), but the total amount of the contribution is limited to six percent of the sale price of the home.

According to HUD 4000.1, interested parties can contribute as follows:

“Interested parties can contribute up to 6 percent of the sales price towards the borrower’s issuing fees, other closing costs and discount points. The 6 percent limit also includes:

  • Paying prospects for permanent and temporary interest repurchases and other payment supplements;
  • Mortgage interest payments for fixed rate mortgages;
  • Mortgage payment protection insurance; and
  • Payment of the UFMIP. “

Please also note here that down payments are expressly omitted from this list. Additionally, payments that exceed the six percent rule are subject to further review by the lender. And the percentage points are only part of the story, according to the FHA Loan Handbook:

“Contributions from interested parties that exceed the actual creation fees, other closing costs and discount points are considered to be an incentive to buy. Interested parties’ contributions of more than 6 percent are considered a purchase incentive. “

Why is the incentive to buy so important? Any contribution that exceeds six percent or is otherwise prohibited under the FHA loan rules can be considered an incentive to buy; The FHA loan rules require that the lender reduce the loan amount one dollar at a time for such an incentive.

Down payment sources and interested party contributions are both subject to a specific set of FHA loan standards. But some things do not count as prospect contributions and would not count towards the six percent. This includes the payment of real estate agent fees, commissions or fees by a third party, traditionally paid by a specific party for the loan transaction in this housing market.

You may need to check with your loan officer about what may apply to your transaction based on your location and lender. Additionally, additional lender requirements and state laws may apply in addition to the FHA loan rules.