Today's tip is just a quick review of how to get 100% financing with FHA loans. FHA loans require a 3% mandatory cash investment. On any other type of loan, the seller is not allowed to pay the down payment for the buyer because doing so would effectively lower the sales price by 3%. It would be viewed as a kick back from the seller to the buyer (an "inducement to purchase"), which of course, is not allowed. However, FHA allows a seller to contribute the 3% to a non-profit organization such as the Nehemiah Program, and at closing, the 3% is transferred to the buyer as a gift. This is how most FHA loans are structured, and it allows the buyer to purchase the property without any money out-of-pocket (100% financing). Nehemiah charges a $499 processing fee, and the seller is allowed to pay for that as well. The reason this is so important is that FHA and VA loans are the only loans right now that do not have issues with declining markets or distressed markets (the mortgage insurance term for declining markets). FHA loans have mortgage insurance (MI), but the MI is not private mortgage insurance and as such, is not subject to the distressed market MI guidelines.
Jude,
Thanks.
FHA is clearly the loan of choice right now with the rates.
Linda