September 5, 2013
A reader asks, “Are there any active down payment assistance programs out there for people who have been approved for a FHA loan. Every one of (the ones I’ve seen so far) are saying the program is no longer available.”
According to the FHA/HUD 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.” Some borrowers, depending on where they live, may be able to apply for down payment assistance via state or local programs. Down payment help is not guaranteed–your state or local programs may not be available or may have expired depending on the nature of those programs.
Such down payment assistance program vary from place to place. You can search a list of state resources, published by the FHA and HUD at http://www.hud.gov/buying/localbuying.cfm.
When it comes to private or charitable down payment assistance, there are strict rules spelled out in HUD 4155.1 Chapter 5 Section B, which instructs the lender:
“FHA does not ‘approve’ downpayment assistance programs administered by charitable organizations, such as nonprofits. FHA also does not allow nonprofit entities to provide gifts to pay off
• installment loans
• credit cards
• collections
• judgments
• liens
• similar debts.
Lenders must ensure that a gift provided by a charitable organization meets the appropriate FHA requirements, and that the transfer of funds is properly documented.”
Additionally, FHA loan rules state, “If a charitable organization makes a gift that is to be used for all, or part, of a borrower’s downpayment, and the organization providing the gift loses or gives up its Federal tax-exempt status, FHA will recognize the gift as an acceptable source of the downpayment provided that the
- gift is made to the borrower
- gift is properly documented, and
- borrower has entered into a contract of sale (including any amendments topurchase price) on or before the date the Internal Revenue Service (IRS) officially announces that the charitable organization’s tax-exempt status is terminated.”
Borrowers with further questions about down payment assistance programs should contact the FHA directly by calling 1-800 CALL FHA.
Do you have questions about FHA loans? Ask us in the comments section.
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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