May 20, 2014
A reader asks, “Is there any assistance I can get in order to buy a house without a down payment or very little with mortgage payments…?”
In most cases the kind of assistance the reader is looking for would likely come from a state or local program, organization, or charity group. When it comes to the FHA loan program itself, the rules governing down payments are found in HUD 4155.1 Chapter Five, Section B, titled “Acceptable Sources of Borrower Funds.”
In this section, we find the following instructions to the lender:
“Under most FHA programs, the borrower is required to make a minimum downpayment into the transaction of at least 3.5% of the lesser of the appraised value of the property or the sales price.”
Chapter Five also adds that the minimum down payment is not the only up-front cash requirement. “Additionally, the borrower must have sufficient funds to cover borrower-paid closing costs and fees at the time of settlement.”
“Funds used to cover the required minimum downpayment, as well as closing costs and fees, must come from acceptable sources and must be verified and properly documented.”
That means that a borrower cannot use cash advances from a credit card, payday loans or other types of non-secured debt to provide down payment funds or closing cost money.
Borrowers are permitted to use certain types of grants or loans, investment proceeds, personal savings, cashed-in stocks or bonds and many other sources of down payment money. Down payment assistance programs are not administered or overseen by the FHA, so it’s up to the borrower to find such programs in the local area.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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