FHA Loan Down Payment Information for 2009

FHA home loans are surging in popularity lately, and for obvious reasons. Many first-time home buyers do not have much money saved up for a down payment, so they use FHA loans to finance their first home purchase. When you combine the benefits of these loans with the hard economic times we are in right now, you have all the ingredients for a popularity surge.

In this article, I’d like to focus on FHA home loan down payments, because that’s what most first-time buyers want to know about (judging by the emails we receive). How much money do you have to put down on an FHA loan when buying a home? Is there any kind of down payment assistance when using the FHA program? These are both common questions among buyers, so let’s address each one of them in turn.

Smaller Down Payment on FHA Home Loans

Without question, the biggest benefit of using an FHA loan is the fact that you can put less money down on the purchase. For a regular mortgage loan — i.e., one that is not insured by the Federal Housing Administration — you would probably have to put down 10% or more. But the down payment on an FHA home loan can be as low as 3.5% of the loan amount. This is obviously something that appeals to first-time home buyers, in particular, because they do not have any equity to put toward the down payment on a future purchase.

Down Payment Assistance With Tax Credits

A fairly new development in the realm of FHA home loans is the $8,000 tax credit for first-time home buyers. This stimulus program has gone through quite an evolution over the last few months. It started as a $7,500 tax credit that had to be paid back over time (more like an interest-free loan than a true credit). Later, the amount was increased to $8,000 and the repayment requirement was removed. This made it even more popular among home buyers.

The most recent development for the tax credit is that it can now be used as a down payment on FHA home loans, in cases where the down payment exceeds 3.5% of the loan amount. There has been some confusion about this, as you might imagine. Many first-time buyers are under the false impression that the tax credit can be used to cover the entire down payment on an FHA loan, but this is not true. The buyer will still have to bring 3.5% to the table in the form of a down payment, and the tax credit can be used to cover any amount that exceeds the 3.5%.

Getting FHA Mortgage Quotes Online

We receive a lot of emails from people who have done their homework and are ready to take the next step and actually apply for an FHA loan. But they don’t know where to go or what to do in order to get the ball rolling. The good news is, you can apply for an FHA home loan online, which can save you a lot of time and energy.

Remember, when you apply for these loans, you do it through a regular lender — not through the FHA itself. You have to use a mortgage lender who has been approved by the Federal Housing Administration to participate in the FHA program, and you have to meet certain guidelines established by that agency. But the initial approval for down payment, credit score, mortgage amount and other loan details will come from the actual lender.

You can find a list of FHA-approved mortgage lenders on the Federal Housing Administration website. But it can be time-consuming to apply for FHA loans through so many different lenders. So my advice is to apply through a network of lenders. You can get started with that by using the link provided at the top of this page.

Conclusion and Summary

Now that you are educated about FHA loan down payments, program requirements, and other details of these loans, you’re in a much better position to move forward and actually apply for one. I hope this article has answered your questions regarding down payments on FHA mortgages, and I wish you all the best in your home buying process.