Among the FHA’s flexible guidelines, the FHA down payment requirements stand out. With only 3.5 percent down, you can get a loan with a credit score as low as 580. No other loan program offers this option. Here’s what you must know about FHA down payments.
The low 3.5 percent down payment most people know about FHA loans requires a 580 or higher credit score. If you have a credit score between 500 – 579, you need a 10 percent down payment. Here’s how that differs on a $200,000 loan:
FHA lenders must source your down payment funds. They must ensure the funds belong to you (they aren’t a loan) and that using the funds won’t pose financial difficulties.
You may use funds in almost any financial account including checking, savings, 401K, IRA, stock accounts, and other investments. You must prove ownership of the account and the funds must be seasoned.
This means you must have ownership of the funds for at least 2 months. Lenders look at the last 2 months of your financial statements. If you have any large deposits within that time, they’ll ask for further proof of the funds’ origination to prove they aren’t a loan.
If any deposits or source of funds seem ‘suspicious’ based on your income and savings patterns, lenders may ask for further documentation or tracing.
You may use gift funds for up to 100 percent of the down payment if you have a 619 credit score or higher and 7.5 percent of the down payment if you have a credit score between 500 – 579. Like your own funds, lenders will ask for proof of the funds’ origination. Donors must provide:
If gift funds aren’t an option and you don’t have the required down payment, there are many down payment assistance programs available within your local city or county.
If you have questions about FHA down payment requirements or how to get help, contact me today and I’ll help you get started.Purchase Qualifier Refinance Rate Checker