FHA Changes On Track to Fill the Gap

FHA has been threatening for a while to stop the use of seller financed down payment assistance programs. I lovingly thought of them as legal money laundering!

The seller would agree to pay 3% to a charity which would in turn give the 3% back to the buyer for their down payment. The seller would also pay a fee in order for the transaction to go through. Many times the seller would increase the price of the property in order to net out the same amount of money in the sale as if the buyer came in with their own 3%. This is one of the bones of contention by FHA as they felt that buyers didn’t realize that they were financing the down payment. They also, after studying the various FHA loans, feel that borrowers who used the seller financed assistance programs were more likely to go into default. Well it looks like, after much debate, that the days of such down payment assistance are numbered.

BUT, don’t despair. There are other options out there to fill the gap. A borrower has always been able to get a gift from a family member, church or employer. There are also local government agencies that are willing to give the 3% down, though they all have guidelines which can be restrictive. The main ones are usually an income ceiling and that there can be no non occupying co borrower (cosigner). The seconds are “silent” meaning there is no immediate repayment.

At any rate, there is still a small window to use the seller financed down payment assistance programs as they will not be stopped until 30 days after FHA puts it into publication.

<photo credit stockxpert.com>

Rusty Wehner
Frances Wehner
Certified Mortgage Planning Specialists
CTX Mortgage Company
Cell: 303-589-4694
Off: 303-615-5756

We consider your liabilities as closely as you do your assets, so more of your money is working toward your financial goals!

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