Home Loan Down Payment Dos and Don'ts
There is no such thing as a zero-down payment FHA mortgage loan, though a borrower may be able to get assistance with the down payment from local agencies or programs designed to help first time home buyers or those who have owned homes before but are looking to buy a new primary residence.
FHA Home Loan Down Payments: You Can Get Down Payment Assistance
As mentioned in the paragraph above, down payment assistance is possible. But it cannot come from any party with a financial interest in the transaction.
Down payment assistance gift funds are not offered by the FHA and cannot be offered by the lender, but local agencies that meet FHA guidelines in this area may. You will need to search in your local area to learn what sources of down payment help might be open to you.
FHA Home Loan Down Payments Must Come From Approved Sources
No credit card cash advances, no payday loans, and no pink slip loans may be used to provide down payment money. That goes for the borrower AND for anyone offering down payment gift funds.
FHA Down Payment Funds in General Must Be Documented
You cannot, for example, bring an envelope of cash to use as your down payment. Without full documentation on source funds, it cannot not be accepted.
What’s more, it’s highly unlikely that your lender can accept the down payment in the form of paper money in any case. One reason? Post-9/11 rules applicable to financial institutions have strict prohibitions on anything that appears to be money laundering including using large amounts of cash for transactions typically handled on a non-cash basis. To avoid even the appearance of impropriety, down payment funds must be deposited and transferred in the usual ways.
FHA Down Payment Gift Funds Must Be Documented
In the same exact way that the borrower’s down payment funds must be properly sourced, gift funds are also subject to the same requirements.
That means your gift giver cannot use a payday loan, credit card cash advance or other non-collateralized loan to get money to give to you-the lender will require the same documentation of these funds as the borrower’s own.
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