FHA Down Payment Requirements On FHA Home Mortgages

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This ARTICLE On FHA Down Payment Requirements On FHA Home Mortgages Was PUBLISHED On January 14th, 2016

What are the FHA's requirements for an advance on FHA residential mortgages

FHA Down Payment Requirements for home purchase requires that homebuyers put a 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 requires to put 10% down payment on a home purchase FHA Loan
  • FHA Down Payment Requirements allow for 100% of gifted funds for the 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 the 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.

FHA Down Payment Requirements: Gift Funds

FHA allows 100% gift funds for the 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 a copy of the check along with the deposit slip of the gift funds as well as an updated bank statement with the gift funds deposited
  • The donor of the gift funds needs to provide 30 days bank statements of their bank account

The bank statements need to show the funds have been seasoned and showing that the gift funds leaving their bank account.

Automated Underwriting System Findings

What is Automated Underwriting System Findings

Mortgage lenders and the Automated Underwriting System does not view gift funds favorably.

If you remove the gift funds for the down payment when the DU Findings are referred/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.

FHA Down Payment Requirements: 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

This holds true as long as the funds are already in the borrower’s bank account, it will be treated like it is the borrower’s own funds.

Tips On How To Come Up With Verified Assets

What are some tips on how to come up with verified resources

The second way of avoiding gift funds for a down payment is by adding the borrower’s name into the donor’s bank account as a joint bank account holder. Once the 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.

To qualify for a mortgage with a lender with no lender overlays on government and conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com.

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