HELP...FHA...Why Doesn't Everyone Need to Put 3% Down??????

Update 3/09: FHA guidelines have been changed since this post was written.

For clarity, FHA has a minimum down payment requirement of 2.25%.

BUT, FHA does require buyers to put at least 3% of the purchase price into the transaction.

So, the buyer is needs to at least pay, with out-of-pocket monies towards closing costs equal to 0.75% of the complete transaction.

So with a particular loan for say $100,000.....

The buyer would have to put a minimum down payment of $2,250. The rest of the out of pocket monies would need to be put towards the transaction - such as the closing costs - which in this case - $750, all equalling $3,000.

Most loan officers in my area, AT LEAST IN MY EXPERIENCE, do not always clarify this and just express that buyers are require to put the straight 3% toward the down payment. Therefore, the whole 3% amount DOES go into the transaction - cut and dry.

If this is not understood, this factor can throw a monkey wrench into the negotiations of a deal....until it is explained and clear by all parties involved!

There you go! Hope this helps.

(01/2009 UPDATE - Please note: This information is current for the date and time that this blog post was written. FHA does change policy and procedure and this above information may not apply at the time that you may be reading this. Please check with a reputable lender to find out the current happenings of FHA lending or go to: Department of Housing and Urban Development ).