January 5, 2015
A reader asks, “I am wanting to know the best way for me to purchase a house with no down payment. Many years ago had a home through an FHA loan, due to divorce we resolved the case. I found a home I would like to have in the country posey road, 5 acres, nice home all new flooring, simple but a very nice home.”
“Can you tell me how to go about getting a loan with no down payment and how I can see if you can consider the home I want meets your requirements etc. I’m on Medicare/disabled with an income.”
HUD 4155.1 Chapter Five Section B directly addresses this reader question, assuming the question is about FHA loans in general.
We can’t speak to non-FHA mortgage loans, but where FHA mortgages are concerned the rules are very clear. A minimum down payment is always required for Single-Family New Purchase FHA mortgage loans. From Chapter Five:
“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.”
“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.”
FHA refinance loans do not require a down payment, but new purchase loans do.
The paragraph quoted above mentions “acceptable sources” of down payment funds. That is a requirement–the lender must verify the borrower’s sources of down payment money, which can come from a variety of sources including the borrower’s own savings, investments, grants or collateralized loans, and many more.
There are unacceptable sources too. The FHA loan program does not allow the borrower to provide down payment funds sourced from payday loans, cash advances on credit cards, or “gift” funds that are expected to be paid back by the borrower.
Borrowers who see zero-down payment loans may be disappointed as most lenders can and do require some form of down payment. One exception is the VA home loans program which does feature a no-money-down option for borrowers, but only for those who qualify for the VA loans program through military service.
Do you have questions about FHA home loans? Ask us in the comments section. You can also follow us on Facebook.
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.
Browse by Date: