Down Payment Assistance for an FHA Loan

If you’re planning to purchase a home, you may be wondering “Is there down payment assistance for an FHA loan?” While the Federal Housing Administration (FHA) doesn’t offer down payment assistance (DPA) loans directly, you can secure DPA through other lenders, such as OVM Financial, which may also offer low closing costs and easy credit qualifying.

Read on to find out more about down payment assistance for an FHA loan.

How does FHA down payment assistance work?

DPA can come in the form of grants, loans, and other products created by a nonprofit organization as well as local, state, or federal housing authorities. Each program has unique guidelines to determine your total DPA amount. For instance, some programs offer DPA based on a percentage of your property’s price, while others cap assistance by a certain dollar amount. Plus there is usually DPA specifically geared toward FHA loans. Here are a few options to consider:

• The Chenoa Fund DPA for FHA Loans is a national DPA program sponsored by the CBC Mortgage Agency. The fund offers eligible FHA loan applicants 3.5% to 5% of the home’s purchase price to help cover a down payment. You would receive these funds through a 0% interest, 30-year second mortgage that the program will forgive if you make 36 consecutive, timely payments on your first mortgage. To qualify, you need a minimum credit score of 600, as well as 18 months of post-purchase counseling for homebuyers.

• State assistance includes FHA-specific DPA options sponsored by state governments as well as county and city entities. This type of assistance includes grants or low-interest loans to reduce the amount you need for a down payment. For example, the Florida Assist program offers up to $10,000 of DPA for FHA loans, and the Virginia Housing Development Authority (VHDA) provides a DPA grant that extends 2.5% of your home’s price for first-time, FHA-approved buyers.

• The HOMEownership Down Payment and Closing Cost Assistance Program from the U.S. Department of Housing and Urban Development, which houses FHA, offers flexible gap financing for first-time buyers who have an income of 80% or less of the area median income. You can receive 10% to 15% of your home’s sales price, as well as $2,500 to cover closing costs. Qualification requirements include homeownership counseling from a HUD-certified agency or counselor, completion of a HUD-certified Homebuyer Education Course, a minimum credit score of 620, and a debt-to-income ratio of 43% or less.

How do I qualify for a down payment assistance loan?

While programs differ, lenders, like OVM Financial, will generally examine your household income and credit score as well as require the following:

• You must not exceed the income limits for the DPA program you select.
• You may be required to complete a homebuyer education class.
• You must reside primarily at your purchased property.
• Your home price must fall within local purchase price limits.
• You must use the DPA in conjunction with an approved mortgage program and an approved mortgage lender.

For more information, reach out to your OVM Financial expert, who can answer questions about down payment assistance for an FHA loan. You can also browse our blog, which covers helpful topics like minimum down payments for a house and whether you have to put down 20% on a house.