FHA Loan Down Payment Requirements

Understanding FHA Down Payments

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FHA loans may allow a lower down payment for eligible borrowers. Your credit profile, lender requirements and the property affect the options available to you; closing costs and mortgage insurance may also apply.

Your Credit Score Determines the Down Payment Requirement

FHA minimum down payment requirements vary by credit score and lender. Ask a lender for the current requirements and a personalized estimate of your down payment and closing costs.

• Higher credit scores may qualify for a lower minimum down payment, subject to underwriting.
• Other borrowers may need a larger down payment or may not qualify.

Proving your Down Payment Funds

FHA lenders must source your down payment funds. They must ensure the funds belong to you (they aren’t a loan) and that using the funds won’t pose financial difficulties.

You may use funds in almost any financial account including checking, savings, 401K, IRA, stock accounts, and other investments. You must prove ownership of the account and the funds must be seasoned.

This means you must have ownership of the funds for at least 2 months. Lenders look at the last 2 months of your financial statements. If you have any large deposits within that time, they’ll ask for further proof of the funds’ origination to prove they aren’t a loan.

If any deposits or source of funds seem ‘suspicious’ based on your income and savings patterns, lenders may ask for further documentation or tracing.

Gift Funds for FHA Loans

You may use gift funds for up to 100 percent of the down payment if you have a 619 credit score or higher and 7.5 percent of the down payment if you have a credit score between 500 – 579. Like your own funds, lenders will ask for proof of the funds’ origination. Donors must provide:

• A gift letter – The gift letter must state your name, the reason for the gift, your relationship, the property address, and that the donor doesn’t expect repayment.
• Bank statements – Lenders need proof of the funds by looking at the last two months’ of bank statements or investment statements. If any deposits don’t seem usual for the donor’s income and saving patterns, they may ask for further documentation.
• Proof of the transfer – Keep a copy of the check the donor provides, the deposit ticket, and your bank statements proving the deposit.

Other Ways to Obtain FHA Down Payment Help

If gift funds aren’t an option and you don’t have the required down payment, there are many down payment assistance programs available within your local city or county.

If you have questions about FHA down payment requirements or how to get help, contact me today and I’ll help you get started.