FHA Down Payment Assistance | Mortgage

By ConnieSanders
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FHA mortgage loans provide many options to the homebuyer. FHA offers down payment assistance programs that make this loan very desirable to buyers with little cash. Even with out the gift or grant programs a buyer can usually get an FHA loan with as little as a 3% contribution. This means moneys applied to closing costs or down payment. It is a little more confusing than conventional loans but the interest rate is as good or better so it is definitely worth the effort.

A gift for the down payment and closing costs may come from sources such as: a family member, close friend, an employer or labor union, a charity organization, or a governmental agency or public entity that has an FHA-accepted homeownership assistance program.

All of the money for the down payment and closing costs may come from a gift or grant program. The funds must be documented to show that no repayment is required and the donor will not put a lien on the property. The gift may not be used to meet the borrower's 3 months PITI (principle, interest, taxes, and insurance) reserves that are needed if they are purchasing a for 3 and 4 unit property.

Gifts must not be used to increase a borrower's assets in order to show reserves remaining after closing that would alter the DU or LP findings from a Refer or Ineligible status to an Approve Eligible or Accept status. The underwriter must review the findings to determine if any gift amount is considered in the reserves reviewed by the system. The gift amount must be deducted from the reserves shown on the findings and the loan must be re-run through the system to provide the true picture of the borrower's assets and obtain a clear approval.

A gift letter must specifically state there is no repayment and clarify that the gift donor is not tied to the loan transaction in any way.

The transfer of money from the donor to the borrower must be documented. A copy of the canceled check or other satisfactory withdrawal document that shows the gift leaving the donor's account and put into the borrower's account is acceptable or if the gift money is being received at the closing table a certified check from the donor and a copy of the withdrawal receipt is required. Copies of these documents must be retained.

If the donor borrowed funds for the gift, the donor must provide acceptable documentation that the funds were not borrowed from a party to the transaction or the mortgage lender. Cash-on-hand from the donor is not acceptable.

An FHA mortgage should be considered by anyone purchasing a home. The interest rates are excellent. They even have a program for manufactured homes. So, when you select a broker for your purchase make sure they are HUD approved. Then you can compare the different loans and chose which is best for you.

About the Author

Connie Sanders is a real advocate for educating the homebuyer about mortgage underwriting guidelines before they apply for a mortgage. Connie put together a mortgage information web site at http://www.mortgageunderwriters.com and can be reached there for any questions you may have.

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