FHA Mortgage Blog

Don't Break The Bank!

The questions I receive the most often from First Time Home Buyers in and around the St. Louis area is regarding the FHA required 3.5% down payment. In many instances the First Time Home Buyers I am working with either barely have that much saved up or they don’t have anything saved up for a down payment, or they think they don’t.

Thanks a lot Uncle Sam!

There has been a lot of media talk and/or rumor that HUD is allowing First Time Home Buyers to monetize the $8,000.00 tax credit for down payment and though this is true it really isn’t. You can not use the advance on of the tax credit for the initial 3.5% down payment but only for any down payment over and above the required down payment.

The state of Missouri through MHDC has a program in which you can get an advance of the tax credit but I only use this program as a resource if all else fails. The reasons; MHDC will not let you monetize the entire $8,000 max is 6% or $6750.00 also they require that you utilize their first mortgage program for the remainder of you financing. I have found that the interest rate on the MHDC first mortgage program is usually much higher than what I would be quoting my borrowers, at the time I am writing this there is a difference of .625% on a 30 year fixed rate FHA mortgage. That is a hefty fee to pay for something that you may be able to do on your own. Over the life of the loan you will end up paying tens of thousands of dollars more for something that you have many other options available to you.

The FHA Underwriting Manual lists 22 different methods of funding the required 3.5% down payment, as an FHA underwriter I was well versed in every one of these methods. Now; as a mortgage loan officer I use this knowledge to help my new home buyers find a way to best come up with their down payment.

Acceptable Methods for Funding Your FHA Down Payment:

There are several additional resources to secure the funds for your down payment and I would welcome the opportunity to discuss them all with you to see what best matches your special circumstances and financial situation. Please feel free to email with your questions, bob@bobrutledge.com, or call me at 314-744-7843. If you would like to receive a no cost/no obligation pre-qualification visit my website to fill out a very simple form, I will not pull your credit report or ask for your social security number.