Over the years FHA has allowed Charity programs such as Home Down Payment Gift Foundation and others provide gifts from the seller. FHA requires that the buyer make a 3% investment in the purchase of the home. So if the buyer is buying a house around $150,000 they would be required to have an investment of $4500 dollars. With the 3 rd party charitable companies this allowed the seller to gift this requirement in a couple of faucets. The buyer could roll the cost into the note, or the seller could just pay it. When it came down to it, this program was just a red tape way of the buyer getting out of the FHA 3% investment requirement. HUD was claiming that homes that were foreclosing 20% were FHA loans that participated in Down Payment Assistance.
The problem with this program was if the home the buyer was purchasing had any equity it was absorbed up in the down payment assistance cost. Typically the buyer had to roll the cost into the note in order for the seller to participate. Essentially this program caused equity problems down the road.
The great situation about this program was it allowed low income families into to homes with little or now money out of pocket. You could get into a home with typically $500 out of pocket. This program helped thousands of families realize the dream of home ownership.
With the new bill that was passed today, the FHA buyer is now required to have 3.5% of there own money to buy a home.
Along with all the tightening up on credit scores and credit reports, now you will required to save to get a mortgage. This is the way it was prior to the late 90’s.
So my advice like always is to save your money and pay all your bills on-time.
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