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The prospect of making a down payment on a mortgage loan can be daunting for some first-time home buyers. But there are ways to make your FHA home loan down payment more affordable. Start by working on your financial qualifications or looking for local down payment assistance programs.

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Affordable Down Payments for an FHA Mortgage

Affordable Down Payments for an FHA Mortgage
November 7, 2018 - The prospect of making a down payment on a mortgage loan can be daunting for some first-time home buyers. But there are ways to make your FHA home loan down payment more affordable.

Some of these strategies involve working on your financial qualifications, others involve doing some research in your local area to find assistance programs, and you may also be able to negotiate your way to a lower down payment on the FHA loan.

Get a Lower Home Loan Down Payment by Working on Your Credit Scores

If you have “marginal” FICO scores, or if your FICO score falls below the range required by the FHA for maximum financing and the lowest down payment, it’s best to work on your credit scores before applying for a home loan.

FICO score standards with the FHA and your lender may not always be identical, so it’s best to learn what your participating FHA lender requires for the lowest down payment amount.

You should not consider paying a third party to “fix” your credit scores. This is work you can do yourself by establishing a consistent record of on-time, every time payments for 12 months before your loan application. You can also help your FICO scores by lowering the balance owed on your credit cards to under 50% for each credit card.

Over time, your FICO scores will improve (if these strategies are applied correctly) and you will get closer to that lower down payment.

Get a Lower Down Payment With Down Payment Assistance Programs in Your Area

FHA home loans permit the use of down payment assistance from family, third parties, or local organizations who offer down payment assistance as a genuine gift and with no expectation of payback.

The down payment funds must be properly sourced (ask your lender what this requires) and cannot come from cash advances on credit cards, payday loans, etc. The FHA itself does not run these programs, nor does it regulate them. It is up to the borrower to find such programs in their local area an apply.

Get More FHA Home Loan Down Payment Resources By Negotiating With The Seller

To be clear: FHA loan rules do not permit the seller of the home you wish to purchase to offer you down payment help. You cannot get down payment funds from the seller.

What you CAN do is to ask the seller (this is the part where negotiating comes in) to contribute up to six percent of the sales price of the home toward closing costs. This frees up those funds that the buyer would otherwise be required to pay; those funds can be applied toward the down payment instead. The seller cannot contribute more than six percent of the sale price of the home under FHA home loan rules-at least not without the lender reducing the loan amount by the money contributed in excess of six percent. Ask your lender about this option if you need to know more.

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