Do You Need Down Payment Help? – FHA News and Views


September 29, 2023

Do You Need Down Payment Help?

Saving for your down payment early is a great idea, and doing so can be easier when you have a clear goal in mind. But how much IS that down payment, and when should I start doing the math?

Some people are intimidated by saving up for and making the down payment.

Even the most disciplined house hunter used to cutting corners for a bigger goal might need some outside help regarding the down payment needed to buy a home.

FHA Loans Require Less Money Down

FHA mortgages have lower down payment requirements than conventional loans, especially if you want to avoid Private Mortgage Insurance on a conventional mortgage (20% is usually required in such cases).

State agencies and other entities operating at the local level often offer down payment grants (and sometimes loans) to qualified borrowers.

First-time home buyers have the broadest range of options from these agencies. However, not all FHA mortgages permit down payment help, which leads to an essential aspect of FHA construction loans.

The need to check with the lender first to see if down payment help is permitted with those mortgages.

Lenders may want single-close construction loan applications to be accompanied by a down payment sourced from the borrower and not outside help.

Down Payment Assistance May Be Available

While it is true that some lenders may not allow down payment assistance on construction loans, that does not mean you can’t get down payment help with other types of FHA mortgages.

Do you need a centralized resource to help locate down payment assistance programs near you?

FHA loan rules have specific requirements for down payment help. You cannot be expected to repay a “gift” for it to qualify, and your lender will need proper documentation on sourcing the money and how it changes hands before closing day.

Seller Contributions, But Not For Money Down

FHA loan rules also let your seller contribute a limited amount (six percent of the sale price) toward closing costs. This money cannot be used toward your down payment.

Regardless, assistance with closing costs frees up money for you to use on your down payment.

Some people begin looking for homes and down payment programs without doing much homework in advance, but you will definitely want to calculate a rough price range the home you want to buy.

You can use an online mortgage calculator to estimate your down payment and monthly mortgage obligation.


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