FHA mortgage loans provide many options to the homebuyer.
FHA offers down payment assistance programs that make this
loan very desirable to buyers with little cash. Even with
out the gift or grant programs a buyer can usually get an
FHA loan with as little as a 3% contribution. This means
moneys applied to closing costs or down payment. It is a
little more confusing than conventional loans but the
interest rate is as good or better so it is definitely
worth the effort.
Gifts for both the down payment and the closing expenses
may come from acceptable sources such as: family member,
close friend, borrower's employer or labor union, a
charitable institution, or a governmental agency or public
entity that has a FHA accepted down payment assistance
program.
All of the funds for down payment and all closing expenses
may come from an acceptable gift or grant program. These
funds must be documented to show that no repayment is
expected and the gift donor will not place a lien on the
subject property. Gifts may not be used to meet the
borrower's required 3 months PITI reserves requirement for
3 and 4 unit purchases.
Gifts must not be used to increase a borrower's assets in
order to show reserves remaining after closing that would
alter the DU or LP findings from a Refer or Ineligible
status to an Approve Eligible or Accept status. The
underwriter must review the findings to determine if any
gift amount is considered in the reserves reviewed by the
system. The gift amount must be deducted from the reserves
shown and the loan must be run through the system again to
provide the real picture of the borrower's assets and
obtain a clear to close approval.
A gift letter is required. The letter must state there is
no repayment required and that no gift donor is tied to the
loan transaction.
The transfer of funds from the gift donor to the borrower
is required. A lender must document the transfer of funds
from the donor's account to the borrower's bank account by
obtaining a copy of the canceled check or other
satisfactory withdrawal document that shows the gift is
leaving the donor's account and is being deposited into the
borrower's account. If the gift amount is being received
at the closing, a certified check from the donor and a copy
of the withdrawal receipt from the donor's bank account is
required. The closing agent must make copies of these
documents to forward to the lender with the closing package.
If the donor borrowed funds for the gift, the donor must
provide acceptable documentation that the funds were not
borrowed from a party to the transaction or the mortgage
lender. Cash-on-hand from the donor is not acceptable.
Other benefits with an FHA mortgage include: low interest
rates, forgiving about minor past credit problems (even
while in a chapter 13), and a no qualifying stream line
refinance. As you can see everyone should consider an FHA
loan.
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Connie Sanders is available to answer any mortgage
questions you have and can be reached from her web sites at
http://www.fha-mortgageunderwriters.com
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