Buy your home for darn near zero down.
The new .5% FHA down payment program has recently been rolled out to home buyers by many lenders. It is a spin off of the well known 3.5% FHA down payment program that has been effectively used for many years.
The old 3.5% FHA down payment program:
A home buyer can purchase a home with only 3.5% of the purchase price as a down payment – With a $200,000 purchase price as a buyer, you can come in with as little as $7,000 ($200,000 x 3.5%) for a down payment.
With the new .5% FHA down payment program:
A home buyer will only need to come to the closing table with .5% of the purchase price – With the same $200,000 purchase price, you come in with as little as $1,000 ($200,000 x .5%) for a down payment.
What happens to the other 3% with this new loan program?
Unfortunately, the 3% doesn’t just disappear!
3% of your down payment is financed into a 2nd mortgage.
The 2nd mortgage:
- The 2nd mortgage is up to 3% of the purchase price.
- The mortgage is a fully amortized loan over 15 years.
- The interest rate on the 2nd mortgage is 8.25%.
The 1st mortgage details:
- The maximum loan amount for the 1st mortgage is 96.5% of the purchase price.
- Typically the mortgage is a fixed rate amortized over 30 years.
Who is eligible for the .5% FHA down payment program?
There are terms and restrictions to the program and here are some details:
- Owner occupied purchases only.
- You must have a minimum FICO score of 600.
- $71,185 income limitation for Maricopa and Pinal Counties.
- This program is not limited to first time home buyers.
- A HUD approved home buyer education required.
Wait! There’s more…
There’s even more that a home buyer can do to get into their new home for as low out of pocket as possible. Just like the 3.5% down payment program, you can receive gift funds from family to cover any closing or down payment costs you still might have. In addition to that, as a buyer, you can negotiate with the seller of your new home to contribute up to 6% of the purchase price to your closing costs and down payment.
You can receive up to a maximum of 6% of the purchase price – $200,000 purchase price x 6% seller contribution = $12,000.
Buy your home for close to zero down.
When you take a look at all of the different options at your disposal to save, it’s very easy to see that you can purchase a home with with very little in out of pocket costs.
Now go out there and find your home!
Your Thoughts?