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 100% Purchase Financing Details

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• 100% Financing & No Money Down, is based on the seller contributing 3% to down payment assistance program and up to 6% seller concessions with a minimum purchase price of $150,000. Lower purchase prices will require borrower to put down money.

• Seller Seasoning Requirements, Seller must owner property for a minimum of 6 months or at least 3 months but FHA will require 2 appraisals. (Realtors should check prior to making an offer on any property).

• Structuring The Purchase Contract, The key to doing the no money down program is getting the realtor to add a statement to the purchase contract which says “Seller to pay 3% of purchase price to a Down Payment Assistance Program for buyer to use as the down payment, only if the sale closes. Seller concessions of up 6% to be used towards buyer closing costs.

• Down Payment, FHA requires 3 percent down payment which can be a gift. We use down payment assistance funds which the seller pays for. The non profit companies charge between $500 to $750 fee which will be on the HUD and can be paid by seller concessions.

• Closing costs, FHA allows up to 6% seller concessions to be used towards closing costs. For a total of 9% seller concessions.

• Credit Requirements, FHA does not have a minimum credit score requirement; it is the lenders who place the credit score requirement. Most lenders have a minimum score of 580; we do have lenders that go down to 500. Late payments in the last 12 months will require a very good reason, example: lost job, laid off, someone in the family was very ill, Payment was posted late by creditor; the debt is a liability of a divorced spouse (proof that the spouse was responsible for such must me be on the divorce decree). No prior government loan defaults, no bankruptcy in the past 2 years and no foreclosure in the past 3 years.

• DTI Ratios, Low credit scores, 31% front and 43% back ratios, with exceptions for certain circumstances. Higher Credit Score approvals can go as high as 47% front & 53% back end ratio.

• Loan Limits, Vary by county https://entp.hud.gov/idapp/html/hicostlook.cfm lists the loan limits for each state and county.

• Property& Occupancy Types, Primary residency only and borrower can only have one FHA loan at a time. Mobile homes are okay. No value for properties with more than 10 acres of land can be used.

• Income documentation, Full Doc only, their most recent year-to-date pay stub documenting one full month's earnings, last 2 pay stubs for bi-weekly, last 4 for weekly and Written Verification of Employment (VOE) also we usually need last 2 years tax returns and W-2’s. Self-Employed persons must provide 2 years personal tax returns. If borrower receives commission income greater than 25% of his/her annual income, obtain most recent 2 years signed individual federal income tax returns and consider business expenses in underwriting.

• Co-Borrowers, Non resident co-borrowers are allowed, but only one co-borrower can have a zero credit score.

• Employment, Consecutive two years history must be verified. No change in employment from W-2 to self-employed is allowed.

• Refinance, If the property being refinanced is not already FHA insured and has been owned for less than 1 year, value must be the lesser of current appraised value or original sales price.

• Mortgage Insurance, All FHA loans are charged a fee which range from 1.25% to 2.25% depending on LTV and credit score and is added to the loan amount and a monthly fee of .5% to .55% of the loan amount. The monthly insurance is paid until the LTV equals 78%. Provided the borrower has paid on the mortgage for a minimum of 5 years.

• Amortization Types, 30 & 15 year, amortizations, no interest only.

• Income from alimony, child support and/or social security, can be grossed up 125% and evidence of receipt of alimony and/or child support using deposits on bank statements or cancelled checks from the most recent three months that support the amount used in qualifying. Provide evidence of at least three years worth of continuance using the front and individual pages showing details of the agreement.

• Judgments & Collections, Evidence of payoff of any outstanding judgments shown on the credit report is required, if applicable. An explanation for major derogatory credit, such as judgments and collections, and minor indications within the past two years is required.

• A non applicant spouse, A social security number and credit report for the non-purchasing spouse must be obtained even if they are not on the loan, to verify no government loan defaults.

• Down Payment Assistance, Is a very simple process and everyone is approved under this program. This is not a grant program; the only qualification is that the seller contributes 3%.

• Retirement Funds, Retirement Accounts: Obtain most recent employer, depository or brokerage statement(s) for each account to verify sufficient funds required to close. Document conditions under which funds may be withdrawn or borrowed. Only 60% of the vested amount of the account may be used as funds to close or cash reserves.

If looking for a no money down or 100 percent mortgage financing, you have several options. Understandably, many homebuyers have little cash on hand for a down payment. Because of the increase in home prices, saving the typical 20% is practically impossible. Fortunately, FHA home loan programs offer 100 percent mortgage financing, which eliminates the need for a large down payment. Here are a few tips on qualifying for a FHA home mortgage loan. 

*100% Financial & No Money Down is based a minimum sales price of $150,000, the seller contributing 3% of the purchase price to down payment assistance program and up to 6% of the purchase price for seller concessions. Lower purchase prices will require borrower to put down money.