One of the advantages of these programs is that they offer options for borrowers to make a down payment of less than 20 percent, which can significantly reduce the overall cost of buying a home. In this article, we examine some of the FHA down payment help for borrowers and how these options can benefit you when you are ready to purchase a home.
In general, FHA mortgage loans require a minimum down payment of 3.5 percent of the purchase price of the home. However, the FHA allows a number of different methods of getting down payment help, which can reduce the amount of money that the borrower needs to come up with at closing. One of these options is known as “seller-assisted down payment assistance.”
Under this program, sellers can contribute up to 6 percent of the purchase price towards the buyer’s down payment and closing costs. This contribution must be made in the form of a gift that is not secured by a lien or mortgage, and the funds cannot be used for anything other than the down payment or closing costs. It is important to note that the seller’s contribution cannot be used to pay off any existing debt on the property.
The FHA also provides another option for down payment help in the form of a grant. Known as the Homeowners Armed with Knowledge (HAWK) Grant, this program provides up to $7,500 in down payment assistance to qualified low-income and moderate-income applicants. To qualify for this program, borrowers must meet certain income requirements and demonstrate their ability to repay the loan.
Finally, the FHA allows borrowers to use gift funds from an eligible source to help cover the down payment and closing costs. These funds must come from an immediate family member, such as parents, grandparents, or siblings, and they must not be secured by a lien or mortgage. Additionally, gift funds cannot be used to pay off existing debt on the property.
The FHA loan programs offer a number of advantages for many borrowers, particularly those who may not have the necessary funds to make a large down payment. With the help of these programs, many people who would not normally be able to afford to buy a home can now become homeowners. For those looking for an additional source of down payment help, the FHA has several options available, including seller-assisted down payment assistance, the HAWK Grant, and the use of gift funds. By taking advantage of these options, borrowers can significantly reduce the amount of cash needed up front to purchase a home.
This article was contributed on Oct 22, 2023