Assets: Down Payments & Closing Costs
Ok, now that you have learned about the pre qualification process and have received a little information on the world of “credit reports”, let’s talk about allowable funds for your down payment and closing costs. With the mortgage industry and loan programs changing by the day and even the minute, this too has had many changes. Your allowable down payment can be determined by your loan program. For example: if you are securing a home as your primary residence (you will occupy the home) and using the FHA mortgage- you are allowed to have the 3.5% down payment made in many forms… A gift from a family member or non for profit, your own bank account, or even your tax return monies. If you are doing a conventional mortgage, with 5% or more down payment, then the funds have to be in your account, and seasoned (in the bank account for 2 months) prior to the purchase of the home. This would be for all conventional mortgages that don’t require a 20% down payment. If you are able to put a 20% down payment on a mortgage, then all the funds can come from a gift from a family member. Again the funds would have to be seasoned (see above) from the family member and a gift letter would have to be completed. All gift funds with any of the above mortgages have to come with NO repayment of those funds. As you can see, the down payment can come from several different sources. As you discuss your mortgage options with your mortgage broker, make sure you have the best down payment option for you and your loan. Now let’s talk about closing costs. Again, this can vary with each different loan program you qualify for. With your government loans, FHA, VA, and USDA, you can have the seller pay up to 6% of your closing costs. There have been talks to reduce closing cost credits for certain programs (check with your broker). With conventional mortgages, the closing cost credit will depend on your down payment and type of loan. Loans with less than a 20% down payment, in most situations, are capped at 3%. Loans with a 20% down payment, the seller can pay up to 6%. The only exception to this is for investment loans; you can only have the seller pay 2% of you closing costs. Thank you for reading my blog. Please feel free to contact me with any questions you may have! Kara Holleran 239-246-6000. And, please remember, the loan industry is changing at all times. It is important to contact your mortgage broker, continue to ask for updates to insure your loan program has not changed, and educate yourself as you move along the home purchase process.
Posted on April 30, 2012, in Finance and tagged Buy a Home, Closing Costs, Down Payment, FHA, Finance Me, Gifted Funds, Kara Holleran, Loan, Mortgage, Pre Qualification, SWFL Real Estate, USDA, VA. Bookmark the permalink. 1 Comment.