With today’s low interest rates and available home inventory, now is a great time to buy a home using an FHA loan. Getting the funds for the downpayment and closing costs are the single biggest obstacle to home ownership. Using FHA underwriting guidelines, a borrower will learn how to get these funds from a variety of sources.
Strategy 1
Down payment funds can come from several approved sources. First of all, if the borrower has a 401K they may borrow or withdraw funds for the purchase of an owner occupied home. That means the borrower is going to live in the property. Some 401K plans require a payback of the funds withdrawn so the borrower must check on that through the plan administrator. If a payback is required, the monthly payback amount will be added to the monthly debts the borrower already has to determine qualification for the home loan.
Strategy 2
Relatives and close friends may give a gift to the borrower for the downpayment or closing costs. The borrower and donor will both sign a document that the money is a gift and no repayment is required or expected. If the borrower is using a close friend, the relationship must be long term and well documented. A borrower may use as many relatives and close friends as needed to get the required downpayment and closing cost money. Some borrowers have gone to as many as 20 relatives or close friends for small amounts of gift money. For example, if the borrower is considering a home costing $150,000, the required downpayment would be $5,250. If each relative or close friend gave $300 as a gift, the borrower would have their downpayment money. Also, a relative or close friend may borrow the gift money to give to the borrower. However, the borrower cannot be a party to the loan or have any financial responsibility for repaying it. FHA has specific rules regarding the documentation of the gift funds. They are precise, but not onerous.
Strategy 3
Another source for downpayment money can be the borrower’s employer. It is permissible for the borrower’s employer to also give a gift to the employee/borrower. Generally, the employee/borrower is a great asset to the company and the company recognizes that through the gift. The borrower should check with their Human Resources Department for more information. Again, the same rules for gifting apply.
Strategy 4
Under FHA guidelines, the seller of a property may contribute up to 6% of the sales price toward the borrowers closing costs and prepaid items. The seller cannot contribute any money for the downpayment. By definition, prepaid items are generally loan interest, hazard insurance policies and property taxes. An escrow account is set up with the mortgage company to pay the property taxes and hazard insurance as they come due. The yearly amount needed is divided into 12 equal payments and added to the principal and interest payment. This eliminates the need for the borrower having to come up with those costs at the end of the year.
Strategy 5
In addition, the borrower can select a slightly higher interest rate to help pay for required closing costs and perpaid items. As little as a one half percent increase in the par interest rate can yield up to one percent in a rate premium. Put another way, the higher rate would produce $1500 to the borrower for payment of closing costs and prepaids. That is based on a sales price of $150,000. Even with the higher rate, the borrower is ahead by about four years versus if they had paid the $1500 out of pocket.
Using these strategies will enable a borrower to buy a home sooner and begin enjoying the benefits of home ownership.
See Also : Lathem Time Universal Time Card White 100 per Pack E100 http://tinycotey.wyinc.ru/ http://vspug.com/evanmorrisette/