November 17, 2017
What is my FHA home loan down payment? It’s an important question to ask as early as possible in the home loan planning process.
You will need to save up for an FHA loan down payment and there are a few variables that will factor in when it comes time to calculate that down payment. Do you know what they are?
FHA Home Loan Down Payments Are Not A Fixed Amount
The dollar amount of the required FHA loan down payment is not standardized for all home loans. Borrowers should know that the down payment is calculated based on several factors including the adjusted value of the property, credit scores, and lender standards.
FHA Home Loan Down Payments Have A Minimum Requirement
The lowest down payment a borrower is legally allowed to make, assuming the borrower qualifies, is 3.5% of the adjusted value of the home. That means an appraisal is required to determine the home’s value, so the actual dollar amount of your down payment will not be available until after the appraisal.
But in general, it’s possible to estimate how much you will need to save and begin working towards that goal. There is no such thing as a zero down payment FHA home loan with one major exception.
Borrowers who are in federally declared disaster areas who apply for an FHA 203(h) rehab loan for disaster victims will not be required to put money down on a home unless they are using the loan in conjunction with another FHA loan that does require a down payment.
FHA Loan Down Payments May Be Affected By Credit Scores
Borrowers who have FICO scores below 580 are not technically eligible for maximum FHA loan financing, which means a higher down payment is required. The amount of the down payment will, as mentioned above, vary depending on the adjusted value of the property. In these cases, the minimum required down payment is 10 percent of the adjusted value.
It is important to remember that this is the FHA minimum standard. Your lender’s standards may be higher, and this is allowed as long as those higher standards are applied according to federal laws.
FHA Loan Down Payments Must Be Properly Sourced
No matter what specific dollar amount you are required to bring as an FHA home loan down payment, the lender will require that the funds be properly sourced. That means you cannot use a credit card cash advance, payday loan, or other non-collateralized loans to provide funds for your down payment.
The lender will require documentation for the sources of all down payment funds including gifts from family members, employers, etc.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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