August 3, 2012
A reader asks, “Does FHA allow a down payment coming from a signature loan with special insurance; in the event of unemployment the payments are made and in the event of death the loan is paid in full?”
“The money is not coming from a 401k, or a cash advance from a credit card, or any other asset.”
FHA loan rules for down payment funds are strict. HUD 4155.1 Chapter Five covers what is considered acceptable sources of down payment funds, stating, “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.”
The FHA does not allow borrowers to make down payments on FHA home loans using funds obtained from credit card cash advances or other uncollateralized loan sources. HUD 4155.1 Chapter Five states:
“The borrower may obtain a loan for the total required investment, as long as satisfactory evidence is provided that the loan is fully secured by assets such as investment accounts or real property.
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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