FHA Mortgage Definition Game
June 5th, 2007
Related FHA Stories
- FHA Reform To Ban Downpayment Assistance
- Whaddya Mean Your Daddy Ain’t Rich?
- Apples & Oranges
- Apples & Oranges, Part II
- New HUD Push To End Charitable Downpayment Plans
Story Tools
There’s a great oddity with FHA downpayment requirements.
On one hand, the FHA says you need 3 percent down. That money must come from you but help from a relative, employer, union or charity is okay. What’s not okay is a down payment credit from the seller.
On the other hand, the FHA says an owner can make a seller contribution to reduce closing costs of as much as 6 percent of the sale price.
Let’s see: If you want to buy a $150,000 home with an FHA mortgage you’ll need $4,500 down (3 percent of the sale price). The seller can’t give you a dime for the down payment but can give you up to $9,000 (6 percent of the sale price) for closing costs.
Why would it be so terrible if a seller contributed $4,500 for closing costs and $4,500 for a downpayment? The seller concession would still be $9,000?
It may be that HUD is worried that prices will be raised beyond justifiable values so that buyers can purchase with no money down. But how is allowing a 6 percent “seller contribution” not an equal worry? In either case, there’s an appraisal to determine fair market value.
- |
- |
-
- |
This entry was posted on Tuesday, June 5th, 2007 at 6:50 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Listen to FHA Loan Pros columnist Peter Miller on American Public Radio: 
RSS Feed
