There Is One 'No Down Payment' FHA Mortgage Loan
That is not to say that a borrower is unable to get financial help making the down payment.
Borrowers may be gifted down payment funds in accordance with FHA mortgage loan rules, but there is no common zero down payment FHA mortgage. And there IS a single FHA home loan that does NOT require a down payment.
FHA 203(h) Rehab Loans for Disaster Victims
The FHA 203(h) Rehab Loan program for victims natural disasters in federally declared disaster areas is the only FHA forward mortgage loan program that has no down payment requirement.
HUD 4000.1 says of these mortgage loans, “The Borrower is not required to make the Minimum Required Investment (MRI). The maximum Loan-to-Value (LTV) ratio limit is 100 percent of the Adjusted Value.”
These purchase loans (refinances are also available under the 203(h) program) are intended to be used under very specific circumstances as defined in HUD 4000.1:
“Section 203(h) of the National Housing Act authorizes FHA to insure Mortgages to victims of a Presidentially-Declared Major Disaster Area (PDMDA) for the purchase or reconstruction of a Single Family Property.”
Act Quickly to Apply for an FHA 203(h) Mortgage
Those affected by natural disasters who qualify for the FHA 203(h) rehab loan to purchase a replacement home or repair an existing home do not have an indefinite amount of time to do so.
FHA loan rules say the loan must have an FHA case number issued within a year of the time the Presidentially Declared Major Disaster Area has been declared.
FHA 203(h) Rehab Loans can be Used With FHA 203(k) Loans if the Lender Permits
FHA loan rules say the 203(h) rehab loan may be used in conjunction with an FHA 203(k) rehab loan (which is open to all financially qualified borrowers). However, those who choose this route will be required to make the down payment required of the 203(k) loan. From HUD 4000.1:
“If a 203(k) is used in conjunction with a 203(h), the 203(k) LTV applies.”
FHA minimum credit scores for the 203(h) rehab loan program for disaster victims is 500 or higher, but additional lender standards may apply. Talk to your loan officer to determine what lender FICO scores standards may be for that financial institution.
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