Low or No Money DownAcceptable Sources for Down Payments on FHA Loans
The Federal Housings Authority, or FHA, guarantees mortgage loans for prospective home buyers who meet the FHA’s eligibility requirements. FHA loans can be an attractive mortgage options for many families looking to purchase their first home because they offer competitive interest rates and terms while having greater underwriting flexibility for buyers with less than perfect credit. One of the other advantages of an FHA loan over some other conventional loan options is the amount of down payment required. Many conventional mortgage lenders will require a buyer to put down in cash 10%-20% of the home’s sale price, while the minimum required down payment for an FHA loan is just 3.5% of the sale price or the home’s appraised value, whichever is lower.
The FHA requires that the down payment be made by the buyer themselves (see sources of down payment below) – while you should ask your realtor to discuss having the seller offer concessions such as paying some of all of the closing costs, the FHA rules prohibit the seller from supplying the prospective buyer with the down payment funds.
What sources for down payment are acceptable? Where can I get my down payment money from?
One of the most common questions we get is what sources of money are acceptable to use for down payments with FHA loans, and the good news is that there are not too many restrictions and rules on where your down payment money comes from.
Some acceptable sources of funds for use as down payments include:
Funds from a buyer’s savings or checking accounts
Cash (buyer must explain in writing how the funds were accumulated and the amount of time it took to accumulate the funds)
Stock and bonds
Sale proceeds from sale of personal property
Grants or acceptable loans
Employer down payment assistance programs
Gifts (see below)
Gifts of down payment amounts (full or partial) are common. According to the FHA guidelines, gifts of down payment amounts are acceptable if the individual gifting the down payment funds is a relative of the borrower, the borrower’s employer or labor union, a charitable organization or a government agency that has a program providing assistance to low and moderate income individuals and families.
No Money Down VA Loans
Are you a Veteran of our United States Armed Forces who is in the market for a home but worried you won’t qualify for a home loan because you don’t have a lot of money to put down? If you are a Veteran or the surviving spouse of a Veteran service member, you may qualify for a special mortgage loan program through the US Department of Veterans Affairs: a VA home loan. The best part is that when you apply for a VA loan you will not even be required to put down any down payment at all towards your new home, saving you thousands of dollars that you can use towards building savings, renovating or remodeling your new home, or however you like.
What is a VA loan?
VA loans are guaranteed by the US Department of Veterans Affairs, which makes them a less risky investment for lenders. VA mortgage loans are a popular option for our veterans, and have been offered to veterans and their eligible family members since passage of the G.I. Bill of Rights in 1944.
What kind of home can I buy with a VA loan, and how much down payment is required?
With a VA loan, you can purchase almost any type of home they would like, including both existing homes and new construction. Veterans can use the loan benefit multiple times so you don’t have to be a first time homebuyer to take advantage of this program. No down payment at all is required in order to qualify for a VA loan, and CityWorth is proud to support our Veterans.