Update On 2016 FHA Down Payment Requirements
2016 FHA Down Payment Requirements For Home Buyers
2016 FHA Down Payment Requirements for home purchase requires that home buyers put 3.5% down payment. However, to qualify for the 3.5% down payment home purchase FHA Loan, the home buyer needs to have a minimum credit score of 580 FICO. Home Buyers can qualify for FHA Loans with credit scores of under 580 FICO , however, anyone with under 580 FICO credit scores require to put down 10% down payment on a home purchase FHA Loan. 2016 FHA Down Payment Requirements allow for 100% of gifted funds for down payment. The down payment can be gifted by a family member and/or relative but there are rules and regulations on how the gift funds can be used. Gift funds can be used for down payment and closing cost but cannot be used for reserves. Reserves are one month’s P.I.T.I. ( principal, interest, taxes, insurance ) . Three month’s reserves are normally required on mortgage loan borrowers with credit scores under 600 FICO as well as manual mortgage underwriting files.
2016 FHA Down Payment Requirements: Gift Funds
FHA allows 100% gift funds for down payment on a home purchase. The gift fund donor needs to sign a gift letter stating that the gift funds for the down payment is not a loan and the gift funds will not get paid back from the home buyer. The gift funds recipient needs to provide the copy of the check along with the deposit slip of the gift funds as well as an update bank statement with the gift funds deposited. The donor of the gift funds needs to provide 30 days bank statements of their bank account showing the funds has been seasoned and showing that the gift funds leaving their bank account.
Mortgage lenders and the Automated Underwriting System does not view gift funds favorably. There are many times where mortgage loan borrowers with credit scores under 620 FICO will get a referred/eligible per DU Findings and not get an approve/eligible per DU Findings due to having gift funds for their down payment. If you remove the gift funds for down payment when the DU Findings are refer/eligible, the new findings may result in an approve/eligible just by not having gift funds and the home buyer having their own funds for the down payment.
How To Avoid Gift Funds
A home buyer can get gift funds and use it as their own funds for the down payment on a home purchase. There are two ways of doing this. First is by getting the gift funds deposited in the home buyer’s bank account and let it season for sixty days. Mortgage lenders will require 60 days of bank statements and as long as they funds are already in the mortgage loan borrower’s bank account, it will be treated like it is the mortgage loan borrower’s own funds.
The second way of avoiding gift funds for down payment is by adding the mortgage loan borrower’s name into the donor’s bank account as a joint bank account holder. Once the mortgage loan borrower’s name is added on the bank account of the gift donor, get sixty days of bank printouts and have the printout signed, dated, and stamped by the bank teller. Then get a letter by the main account holder stating that the joint bank account holder has full access and rights to the joint bank account.