March 16, 2018
How much is my FHA home loan down payment? That is a very important question to ask, since borrowers will need to save up for the down payment, or use approved sources for it.
There is no specific dollar amount specified for your FHA home loan down payment, since the down payment is calculated using the adjusted value of the property following an FHA appraisal.
Borrowers hoping for a specific dollar amount should estimate the amount of a possible down payment using a figure that is reasonably contained within the house hunter’s price range. This dollar amount will be an estimate only since the true value of the home for down payment purposes won’t be available until after the appraisal process is complete.
FHA loan rules specify that for most forward mortgages (except for 203(h) disaster recovery FHA loans) the very minimum you can pay as money down on the home is 3.5% of the adjusted value of the home.
That 3.5% down payment minimum is not guaranteed-your FICO scores and other financial qualifications may affect how much you are required to pay specifically as your FHA home loan down payment. Borrowers who do not meet lender standards or FHA loan rules for “maximum financing” may have to make a higher down payment as a compensating factor.
And then there are situations where the borrower may be financially qualified for maximum financing, but circumstances require a higher amount down. This is true in cases where an “identity of interest” has been associated with the transaction; these require 15% down or more.
FHA loan rules say an identity of interest transaction happens when there is a sale of a home “between parties with an existing Business Relationship or between Family Members”.
Certain family-related transactions do NOT require 15% down and are exempt from this rule. Those include cases where a borrower is buying the principal residence of another family member. Occupancy is a requirement for FHA home loans, so the purchase must be for the borrower’s new home.
Other situations also exempt a borrower from this higher down payment related to identity of interest; corporate employee transfers and times when a tenant of more than six months is purchasing from a landlord (proper documentation is required).
Talk to your lender if you aren’t sure how FHA loan down payment requirements work in your specific circumstances. Remember, your FICO scores are an important factor; both FHA loan rules and lender standards will apply.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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