FHA Downpayment Assistance
The Federal Housing Administration (FHA) announced it would no longer allow borrowers to use seller-financed down payment assistance programs from non-profit organizations. This ruling will go into effect October 31, 2007; shutting down nearly 200 organization nationwide that have participated in arranging assistance for lower income buyers. Due to an agreement signed in 1998 between FHA and Nehemiah, this non-profit organization will continue to offer down payment assistance for contract written and signed prior to April 1, 2008.
This is an overview of how the down payment assistance programs are structured.
· FHA requires a minimum down payment of 3% of the sales price. This can come from the buyer, gift from a family member, employer, state and local agencies, or a non-profit organization.
· A buyer makes an offer on a home with the stipulation that the sellers contribute the 3% to the non-profit organization the buyer has chosen. In some cases the sellers contribute the 3% plus enough to cover most, if not all, of the closing costs. For this service the non-profit organization receives a $500 fee that is also paid by the sellers.
· In most cases, the sellers raise the price of their home to cover this cost.
· The non-profit organization “gifts” the money to the buyers at the closing of the loan.
FHA is no longer looking at this type of assistance as a gift, but more as an incentive to purchase, which is not allowed on FHA loans. Also, they feel this type of arrangement has falsely inflated the prices of homes. Further study by the Government Accountability Office, showed that borrowers receiving assistance from these charities were more that twice as likely to default or become delinquent than other FHA borrowers.
This will put an additional squeeze on lower income buyers, but FHA still allows gifts from family members, employers, and state and local organizations. FHA offers programs to help the lower income buyers qualify for a home purchase. Their ARM loans are reasonable and safe for the borrower, and their Buy-Down program to initially lower the payment, is another option for homebuyers.
Call Denise Wing at 303-987-0622, for more details on FHA loan programs that can help you with your financial needs.
Academy National Mortgage
Denise Wing C.E.O.
Certified Mortgage Lender
©Academy National Mortgage Corporation 2007
This is an overview of how the down payment assistance programs are structured.
· FHA requires a minimum down payment of 3% of the sales price. This can come from the buyer, gift from a family member, employer, state and local agencies, or a non-profit organization.
· A buyer makes an offer on a home with the stipulation that the sellers contribute the 3% to the non-profit organization the buyer has chosen. In some cases the sellers contribute the 3% plus enough to cover most, if not all, of the closing costs. For this service the non-profit organization receives a $500 fee that is also paid by the sellers.
· In most cases, the sellers raise the price of their home to cover this cost.
· The non-profit organization “gifts” the money to the buyers at the closing of the loan.
FHA is no longer looking at this type of assistance as a gift, but more as an incentive to purchase, which is not allowed on FHA loans. Also, they feel this type of arrangement has falsely inflated the prices of homes. Further study by the Government Accountability Office, showed that borrowers receiving assistance from these charities were more that twice as likely to default or become delinquent than other FHA borrowers.
This will put an additional squeeze on lower income buyers, but FHA still allows gifts from family members, employers, and state and local organizations. FHA offers programs to help the lower income buyers qualify for a home purchase. Their ARM loans are reasonable and safe for the borrower, and their Buy-Down program to initially lower the payment, is another option for homebuyers.
Call Denise Wing at 303-987-0622, for more details on FHA loan programs that can help you with your financial needs.
Academy National Mortgage
Denise Wing C.E.O.
Certified Mortgage Lender
©Academy National Mortgage Corporation 2007
posted by Academy National Mortgage at 2:59 PM
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