Recently we posted about FHA rules for down payments. For all FHA new purchase home loans, there is a minimum down payment of 3.5%. Borrowers are required to make this down payment above and beyond any closing costs and related fees that may be required to be paid up front.
Some borrowers may have a difficult time coming up with cash to make down payments, and while the FHA does allow loan applicants to borrow money for a down payment, it must come from a third party with no financial interest in the FHA insured loan transaction and must be secured by “real property” rather than a credit card cash advance or signature loan.
Some borrowers ask if the FHA also offers a down payment assistance program to help borrowers with their up front expenses, but according to the FHA official site, “HUD has no direct grant programs for down payment or closing cost assistance. However, HUD does provide funding to state and local governments for this purpose.”
That means a borrower may be able to turn to a state or local program in the area where they wish to purchase the home for assistance. This type of FHA insured loan down payment help is not guaranteed, and programs may vary from zip code to zip code. The FHA has a list of state resources at http://www.hud.gov/buying/localbuying.cfm that can help you start your search.
It’s important to note that not all states may offer such assistance, and qualifying factors for those that do may vary from program to program. There may even be private or non-profit organizations with programs that can help. The Arizona Habitat For Humanity program, for example, may have different features than the Montana Homeownership Network. The type of assistance may also vary. Some programs may offer tax credits to new home buyers while others offer matched savings accounts for future home purchases or other forms of assistance.