FHA 203k Downpayment Requirements
If you are purchasing a property in , the down payment requirements for an FHA 203k loan are the same as a standard FHA, 3.5% of the total loan amount.
The difference between the down payment on a regular FHA loan and a 203k is that the 203k loan requires a minimum 3.5% down payment based on the total amount of the home's purchase price plus the cost of repairs.
Obviously, figuring out the exact amounts for rehab costs and loan fees will be something that your 203k Lender and Rehab Consultant will need to be a part of, especially since there may be before and after repair values, mortgage insurance premiums and interest rate discounts to consider.
Bottom line, the main point to pay attention to when figuring your budget for a down payment on a purchase that is using an FHA 203k loan for home financing is that the total amount you will be responsible for is 3.5% of the total loan amount, which will be due at the time of closing.
Receiving Gift Funds For A 203k Rehab Loan
Will you have the opportunity to use gift funds as the down payment for your FHA 203k mortgage?
If so, FHA guidelines require that you provide transfer documentation for both the source and receipt of the gift. In addition, a borrower must provide the lender with a gift letter that includes the donor's name, address and telephone number, the dollar amount of the gift, the donor's relationship to the borrower, and a statement that no repayment of the gift funds is required.
The gift letter must be signed and dated by both borrower and donor.
Acceptable Sources Of Gift Funds For 203k Loans:
- A relative of the borrower
- A charitable organization
- The borrower's employer or labor union
- A close friend with a documentable relationship to the borrower
- A government agency or public entity that provides home ownership assistance
Unacceptable Sources Of Gift Funds For 203k Loans:
- Cash that is not documented
- Funds from the seller
- Donation from the real estate agent or mortgage officer
- Builder kick-backs
- Any party to the transaction
Questions About Documenting Gift Funds:
Are the gift funds already present in the borrower's bank account?
If so, a copy of the document showing the withdrawal from the donor's account is required, as well as the deposit slip and bank statement reflecting the deposit of said funds into the borrower's account.
Will the gift funds be provided at closing in the form of a check or money order?
If so, the donor must provide a document or canceled check showing the amount of the gift funds and their withdrawal from the donor account.
Will the funds be provided at closing as a wire transfer?
The donor must provide documented evidence of the transfer.
Will the funds be provided at closing via a loan to the donor?
The donor must provide written documentation that the funds were borrowed form an acceptable source and NOT from any party to the transaction, including the 203k lender.
Did You Know?
A rehab loan can be used for a purchase or refinance, and you do not have to be a first-time homebuyer to use it. Contact Us today at (888) 450-9639 to see how a 203k loan can increase the value of your property.
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