Feb. 1, 2017
Years ago the “norm” was that families would save for a 20% down-payment to buy a home. In 2016 this is no longer the norm, and hasn’t been for some time. There are hundreds of loan programs available to buyers in today’s market, some that offer financing with as little as 3.5% down (or zero down for Veterans!).
One of the most common types of mortgages is called an FHA Mortgage. An FHA Mortgage is a mortgage that is insured by the Federal Housing Administration. Buyers who purchase homes with an FHA mortgage pay for mortgage insurance, which protects the lender (Bank) from a loss if the borrower defaults on the loan. FHA mortgages have become increasingly popular because of the lower down payment requirements, often as low as 3.5% or the purchase price, and less stringent lending standards.
With an FHA mortgage, approval is conditioned upon the lender verifying that the down payment has come from an “Approved source”. A buyer can acquire the down payment using their own savings, gift from a family member (if approved by the lender), or a grant from state and local government down-payment assistance programs. FHA does specifically insist that a down payment gift cannot be given by the seller, real estate agent or broker, builder, or an associated entity.
While the FHA does not allow sellers, real estate agents or brokers, builders, or lenders to pay any portion of the down payment, assistance with closing costs is allowed. The FHA does allow some concessions in closing costs from sellers, agents, brokers, and lenders and this is often discussed during price negotiations.
If a home buyer is a Veteran, a VA loan is a good option. Some VA programs offer financing with as little as zero dollars down. As a Realtor with the Military Relocation Professional certification offered by the National Association of Realtors, I can connect Veterans with VA approved lenders who can advise them on the loan options available. It is important to make sure you have all paperwork needed for this financing option.
It is important to remember that both the FHA and the VA loans have certain requirements that the property must meet in order to qualify for financing. A good real estate agent will know these requirements and be able to guide a home buyer in the appropriate direction. For more information about FHA loans, visit http://portal.hud.gov/hudportal/HUD?src=/buying/loans. For more information about VA loans, visit http://www.benefits.va.gov/homeloans/ or call us at 727-859-7684.