Using Gift Funds To Cover Your Down Payment
Many first-time home buyer programs let you cover the whole down payment with gift funds.
For example: If youre buying a $250,000 home with a3.5 percent down FHA loan, your entire $8,750 down payment couldbe a gift from your parents.
- The Conventional 97 loan and Freddie Mac Home Possible also allow 100 percent of the down payment to come from gift funds
- Fannie Maes HomeReady loan, by contrast, requires a 3 percent borrower contribution at minimum. That means youd have to pay at least $7,500 toward the $250,000 home out of pocket
Gift money can come from a parent, friend, employer,or anyone generous enough to help you out with your home purchase.
However, if youre going to use gift funds towardyour down payment, they have to be properly documented by the gift giver andthe home buyer. That means writing a gift letter to show your mortgage lender the money came from a verified source.
Thisextra step in your home buying process will be worthwhile. Be sure to let yourloan officer or real estate agent know early in the process that youll beusing gift funds for a down payment.
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What Is A Down Payment
In real estate, a down payment is the amount of cash you put towards the purchase of home.
Down payments vary in size and are typically described in percentage terms as compared to the sale price of a home.
For example, if youre buying a home for $400,000, youre bringing $80,000 toward the purchase, your down payment is 20 percent.
Similarly, if you brought $12,000 cash to your closing, your down payment would be 3%.
The term down payment exists because very few people opt to pay for homes using cash. Their down payment is the difference between they buy and what they borrow.
Down payment requirements for mortgage loans
You cant just choose your down payment size at random.
Depending on the mortgage program for which youre applying, theres going to be a specified minimum down payment amount.
For todays most widelyused mortgage programs, down payment requirements are:
- FHA Loan : 3.5% down payment minimum
- VA Loan : No down payment required
- Fannie Mae HomeReady Loan: 3% down minimum
- Conventional Loan : 3% minimum
- Conventional Loan : 20% minimum
- USDA Loan : No down payment required
- Jumbo Loan: 10% down
Remember, though, that these requirements are just the minimum. As a mortgage borrower, its your right to put down as much on a home as you like and, in some cases, it can make sense to put down more.
Purchasing a condo with conventional loan is one such scenario.
Making a larger down payment can shrink your costs with FHA loans, too.
How Much House Can I Afford Making 140k A Year
I make $ 140,000 a year. How many houses can I afford? You can afford a house for $ 476,000.
How much house can I afford on 120k salary?
If you earn $ 50,000 a year, the total annual housing cost should ideally be no more than $ 14,000, or $ 1,167 a month. If you earn $ 120,000 a year, you can go up to $ 33,600 a year, or $ 2,800 a month as long as your other debt does not push you beyond the 36 percent limit.
How much do I need to make to afford a $350000 house?
You have to earn $ 107,668 a year to afford a 350k mortgage. We base the income you need on a 350k mortgage on a payment that is 24% of your monthly income. In your case, your monthly income should be around $ 8,972. The monthly payment on a 350,000 home loan is $ 2,153.
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Fha Loan For A $200000 Home
- Due upfront: $14,860
What youll pay at closing
Here are your figures for a typical cash requirement on closing:
- Minimum down payment: $7,000
- Possible closing costs: $7,720
- Upfront MIP: $3,375
You can normally roll up your initial MIP payment into your loan and pay it down along with your mortgage. Most people do that.
If you do, your total loan amount will be the original $193,000 plus your initial MIP payment of $3,735, which makes $196,375.
Because youre borrowing more, your 4% closing costs will inch up to $7,855 from $7,720.
So you could close on your FHA loan for a $200,000 home with as little as $14,860. Indeed, if you find a lender that charges lower closing costs of 2%, it might be as little as $10,930.
Remember, if youre eligible for help from a down payment assistance program, you might get all or some of that paid for you through a loan, forgivable loan, or grant.
Ongoing FHA loan costs
Assuming youve rolled up your initial MIP payment into your loan, youll be borrowing $196,375. And, remember, were assuming a fixed mortgage rate of 3.474%, which may have changed by the time you read this.
Based on those assumptions, our FHA loan calculator says your monthly mortgage payment should be $1,220. That breaks down as:
- Principal and interest: $879
- Monthly mortgage insurance fee: $139
- Property taxes: $162
- Homeowners insurance: $40
So take these as useful but rough estimates rather than firm figures.
Ma Down Payment Assistance Programs
There are various down payment assistance programs in every state, and Massachusetts is no exception. MassHousing Down Payment Assistance offers eligible buyers down payment assistance of 5% on homes in Boston or one of the commonwealths 26 Gateway Cities. This program additionally offers assistance of up to $15,000 in all other communities in Massachusetts.
To find reliable organizations that provide down payment assistance in MA, we recommend this tool from Massachusetts Housing Partnership. This search engine is designed to help first time home buyers in Massachusetts find programs offering down payment assistance by region. Buyers will find that from Western Massachusetts and the Berkshires all the way to the Cape, the state of Massachusetts offers numerous options to help with making a down payment.
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Down Payment Assistance Programs And Gifts
Rules for FHA loans are easier than most when it comes to the source of your down payment. So you may be able to accept the whole amount from a down payment assistance program or as a gift.
Still, its important to remember lenders may impose stricter standards than the FHA minimums outlined here. So that last bit of advice stands: shop around for a more sympathetic lender if yours has strict rules over down payment assistance and gifts.
Qualifying For An Fha Loan
Qualifying for an FHA loan is much easier than trying to qualify for a conventional mortgage loan. No matter your income level, you can gain access to an FHA loan. You can check with several different lenders to see what their requirements are and there is no minimum income level required to qualify.
However, you should still have a reasonable debt-to-income ratio, so you can show you can afford the monthly payments. Borrowers with lower credit scores or less-than-perfect credit are also likely to get approved for the 3.5% down payment. However, if you can pay a bit more toward the down payment of the home, your score can even be between the 500 and 580 mark, and you could still qualify.
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How Much Income Do I Need For A 200k Mortgage
Before you invest 200k into a home, youll want to be sure you can afford it.
To be able to borrow a 200k mortgage, youll require an income of $61,525 per year.
The income you need is calculated using a 200k mortgage on a payment that is 24% of your monthly income. In your situation, your monthly income should be about $5,127.
Getting The Down Payment
There are many ways to fund a down payment ask lenders to review your options. Of course, gifts from family and friends are one possibility if they possess the resources to help. Another avenue is tapping into retirement assets the IRS won’t assess a 10 percent early withdrawal penalty for those under retirement age for withdrawals of up to $10,000 for home purchases. That’s per person, so it’s $20,000 per couple. Even with all of this, gaps still exist.
The power of the FHA loan includes seller credits. Motivated sellers can pay up to 6 percent of the home sale closing costs or the down payment. For the $636,150 maximum San Francisco loan, the down payment of $22,265.25 could be covered completely by the seller, with 2.5 percent still available to use toward other areas of the transaction.
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Are Down Payments Needed To Refinance An Fha Loan
Sometimes customers ask us if down payments are required when you refinance an FHA loan. The answer is no. However, lenders might have home equity requirements they measure using aloan-to-value ratio . These requirements might state you need to keep your LTV below a certain maximum percentage to get your refinance approved.
Keep in mind that refinancing an FHA loan often comes with closing costs you will need to pay or add to your loan amount. By refinancing, the total finance charges may be higher over the life of the loan. If you qualify for FHA streamline refinancing with Freedom Mortgage, we can offer you refinancing with less paperwork, easy credit qualification, and faster closing.
Other Loan Options To Consider
If you have high credit scores but are having a hard time raising a down payment of 20% of the purchase price, FHA loans are not your only option. Consider some of these alternatives:
- Freddie Mac Home Possible loan: Freddie Mac, as the Federal Home Loan Mortgage Corporation is popularly known, devised the Home Possible loan to lower the barriers to homeownership. Down payments start at 3% and can come from family, employer assistance, a secondary loan or âsweat equity.â The minimum credit score requirement is 660 , but if you or a co-applicant lack a credit score, you still could qualify through an alternative underwriting process.
- Fannie Mae 97 LTV loan: The Federal National Mortgage Association, better known as Fannie Mae, authorizes two categories of mortgage loans that require minimum down payments of 3% :
- The Fannie Mae Home Ready 97 LTV loan is designed for low-income borrowersspecifically those with incomes below 80% of their local area median income as designated by the U.S. Census Bureau.
- The Fannie Mae Standard 97 LTV loan is open to any borrower, provided at least one applicant is a first-time homebuyer and all applicants have credit scores. If all applicants for Fannie Mae LTV loans are first-time homebuyers, at least one must complete a homeowner education program.
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Fha Home Improvement Loans
FHA 203 loans
The FHA 203 loan is a unique product that allows you to both buy a home and fund repairs and improvements to the property with a single loan even if the cost of those improvements means that you need to borrow more than the home is worth.
The maximum you can borrow is based on either the price of the home plus repair costs, or the projected increase in the property value after improvements.
An FHA 203 can also be done as a type of cash-out refinance, although with the restriction that the funds must be spent on home improvement costs.
Interest rates run a bit higher than on a regular FHA purchase or refinance, often about 1 percentage points more.
FHA 203 lenders offer two versions of the loan, the standard and the Streamlined. The Streamlined is for lesser, nonstructural repairs and improvements, such as remodeling, HVAC replacement, basement refinishing or the like. It allows you to borrow up to $35,000, with no minimum amount.
The standard FHA 203 is for more extensive work, particularly structural changes such as adding new rooms, a new roof, repairing structural damage or any work exceeding $35,000. There is a $5,000 minimum loan amount.
The maximum you can borrow is the either the current value of the property plus repair costs, or 110 percent of the estimated value of the property after repairs, whichever is less.
More information: 203 mortgage covers both purchase and repairs
FHA Title I loans
FHA Energy Efficiency Mortgages
What Are Todays Mortgage Rates
Todays mortgage rates are still at historic lows, even for borrowers with less than 20% down. In fact, borrowers with lowdownpayment government loans often get access to belowmarket rates.
So dont write off home buying because youre waiting to save 20% down. Many buyers can qualify today and dont even know it.
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How Much Is Pmi Usually
On average, PMI costs range between 0.22% to 2.25% of your mortgage . How much you pay depends on two main factors: Your total loan amount: As a general rule, PMI expenses are higher for larger mortgages. Your credit score: Lenders typically charge borrowers with high credit scores lower PMI percentages.
What Factors Affect Fha Loan Limits
There are several factors that affect FHA loan limits, but the primary factor is pricing in the housing market and how it changes from year to year. Both the median home price in a local area, as well as the national conforming loan limits, will impact FHA loan limits, Valdes says.
When considering the local area for housing, that area refers to a metropolitan statistical area , as defined by the U.S. Office of Management and Budget. Within the MSA, the median home price for the highest-priced county must be used to calculate the loan limit for the entire MSA.
The FHA maximum loan amount also is limited by U.S. statute, which, as previously mentioned, is set at 65% of the conforming loan limit. The highest-possible loan limit is set at 150% of the conforming loan limit.
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Yes Or No For Down Payment Sources
What if you can’t come up with the entire down payment on your own? Lenders will require the full amount of money as the required down payment, but friends, family, and employers can make a down payment gift to you that reduces your financial burden. That money is required to be verified by the lender as having come from an approved source.
The FHA doesn’t just list who may give such a gift–it also has rules discussing who MAY NOT provide gift funds for an FHA loan down payment. The gift donor may not be a person or entity with an interest in the sale of the property, such as the seller, real estate agent, or the builder.
FHA loan rules are specific and clear in these areas to insure fairness and to preserve the integrity of the home buying process with FHA loan funds.
What Happens If I Put 20 Down On An Fha Loan
Asked by: Travon Shields
FHA loan program down payment minimums are 3.5% for borrowers with FICO scores at 580 or better. FHA loan program rules for borrowers with FICO scores between 500 and 579 require a 10% down payment, but nothing as high as 20%. … But in general, borrowers are not asked to pay 20% down on FHA loans.
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California Housing Finance Agency
The California Housing Finance Agency offers first-time homebuyers down payment assistance through its MyHome Assistance Program. Borrowers obtaining an FHA loan through a CalHFA lender can qualify for a deferred-payment junior loan to cover the down payment, up to 3.5 percent. This is a “silent” loan, meaning you don’t pay anything until the home is sold.
References
More About Fha Loan Down Payments
1) Remember, the FHA does not offer down payment assistance. That doesn’t mean the agency doesn’t provide resources that can help you locate a DPA program in your area. These programs must meet adhere to federal regulations when providing down payment help to borrowers.
2) If you are concerned about your ability to credit qualify for an FHA mortgage, talk to a participating lender and ask some advice about your chances and what can help get you closer to loan approval. There’s no substitute for good credit and you’ll want to review your credit report long before you start filling out loan paperwork.
3) Your rental history can help boost your credit if you pay on time and have a pattern of doing so. But the catch is that your landlord must report this activity to the credit agencies. You’ll need a minimum of 12 months of on-time rent and utility payments anything less can seriously hurt your chances for loan approval.
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The Fha Loan Process In Massachusetts
Step 1: Find a mortgage broker that offers HUD/FHA Loans.
The first step on your journey to applying for an FHA loan in MA is to work with a mortgage broker. A mortgage broker can review your finances to determine which lender is the best fit for your specific situation. Once youve decided on a lender, your broker will act as a liaison between you and the lender and represent your interests throughout the loan application process to ensure that you receive favorable terms.
Since mortgage brokers work independently from lenders, theyre able to provide an unbiased perspective and are committed to providing the best possible service for their client.
Step 2: Get pre-qualified.
Mortgage pre-qualification refers to the process in which the lender evaluates your financial situation and determines whether youre qualified for an FHA loan. Its referred to as pre-qualification because this step happens before you find a home. During this step the lender will review the following:
- Your tri-merge credit report, a comprehensive report that combines your individual credit reports from Experian, Equifax and TransUnion.
- Your debt-to-income ratio, which is the percentage of your monthly gross income that goes toward paying debts.
- Your assets, which can include your savings account, 401, stock dividends, etc.
- IRS W-2 forms and tax returns from the past two years.
- Pay stubs from the past two months.
- An employee verification letter.
Step 3: Find a property you love.
