April 24, 2018
Compared to some non-FHA mortgages, FHA home loans feature low down payments-as little as 3.5% of the adjusted value of the property for financially qualified borrowers.
FICO scores and other credit data will play an important part in the required down payment-if your FICO score is too low the lender may require 10% down (lender standards will vary), but financially qualified borrowers should expect 3.5% down and budget for the down payment accordingly.
One type of FHA home loan may not require any down payment at all, depending on circumstances, as we’ll read below.
FHA Loan Down Payment Requirements: FHA Loan Assumptions
FHA loan assumption rules permit the home owner to allow another person to assume the mortgage loan-the house and the debt are signed over to someone else, with the lender’s participation.
FHA home loan rules in HUD 4000.1 (the FHA Single Family Home Loan Handbook) tell us no down payment is required for an FHA home loan assumption.
This is an FHA home loan guideline and may not include any lender requirements in this area-home owners and those trying to assume the loan will need to discuss this area with the lender to see what may be required from that financial institution.
FHA Home Loan Down Payment Requirements: Special Incentive Programs
The FHA has programs for purchasing repossessed HUD “REO” homes. The HUD “Good Neighbor Next Door” program is intended for any borrower who wants to be an owner/occupier of an REO home and “…who is a full-time law enforcement officer, teacher, firefighter, or emergency medical technician who meets HUD requirements to purchase a specifically designated HUD REO Property located in a HUD-designated Revitalization Area” with a minimum down payment of $100 (at the time of this writing.)
There is another HUD REO program is called $100 Down, which permits borrowers “to purchase a HUD REO Property with FHA-insured financing with a minimum downpayment of $100”. This program doesn’t have the same restrictions as Good Neighbor Next Door, and can be processed as a 203(k) rehab loan to help the buyer fix up the home and bring it up to code.
FHA Home Loan Down Payment Rules: FHA 203(h) Rehab Loans
Borrowers living in federally declared disaster in search of a rehab loan to replace or repair a home should talk to a lender about FHA 203(h) rehab loan options.
This type of FHA loan, not to be confused with an FHA 203(k) rehab loan, is for those in federally declared zones and can be used in conjunction with other FHA home loan products such as FHA Energy Efficient Mortgages.
The FHA 203(h) loan has no down payment requirement, which makes it quite unique among FHA loans in this regard (with the exception of FHA loan assumptions as described above). However, when using an FHA 203(h) loan in conjunction with another FHA loan that does require a down payment, that down payment requirement will apply. Ask your lender how to apply for a rehab loan in conjunction with other FHA mortgage loans.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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