Saving for a home down payment, but not quite there yet?
If your progress is slow, I have bad news. It’s no longer a marathon, it’s a race.
Utah is one of the fastest growing states in the country. I’ve had borrowers from all over relocate and purchase homes here. Especially from high-cost states like California and Oregon, where home prices are so out of reach, that many simply can’t afford to buy anything.
This is only one small piece of the housing puzzle.
Increased demand has pushed home prices up, which are pushing the cost of property taxes up. Add rising mortgage interest rates in the mix, and you effectively qualify for less home the more you wait.
If you think you’re safe paying rent, think again.
Rent prices are moving up as well. More and more landlords are selling their investment properties and using the cash for other projects. Some were only renting out because their previous home value couldn’t justify a sale. When was the last time you talked to your landlord about the future of your lease?
“But I don’t have a down payment saved” or “I have some credit issues“. Stop that.
If you are determined to build better prospects for yourself, you will find a way. And it starts by researching, asking questions, and taking action.
You’re staring at the start line right now, reading this.
How does the FHA 1.5% down payment work
Regular Utah FHA mortgage loan guidelines require a 3.5% borrower down payment, which can come from a variety of sources – as long as they’re legal.
Savings, retirement funds, the sale of a personal vehicle (as long as properly documented), gifts from family members or a fiance/fiancee, gifts from an employer, government or non-profit entity. With certain limitations, interested parties to the transaction can contribute as well – in our case, this is the lender.
The FHA 1.5% down payment loan program works like any regular FHA loan, except you’re only required to bring 1.5% of the purchase price as your down payment. At closing, the lender will give you a non-repayable, completely forgivable grant in the amount of 2%of the purchase price. No resale or repayment restrictions.
This will help you meet the FHA down payment guidelines, and get you into a home sooner, and for less money.
Who is eligible for the FHA 1.5% down payment loan?
Eligible borrowers will need to meet one of the following criteria:
1. First-time homebuyers, or borrowers that have not had any ownership interest in a residential property during the 3 year period preceding the date of the loan application.
A homemaker or a single parent with no ownership interest in a primary residence other than a joint interest with a (former) spouse is also eligible if the 3-year rule above is met.
2. The borrower’s income is equal to or less than 140% of the county median income, regardless of family size.
The location of the property determines the income limit that will apply. Check the county income limit here. Income that is not used for the purpose of qualifying a borrower will not count towards the 140% limit (overtime for example).
Example: The Salt Lake City area median income (AMI) is currently $80,000. 140% of that is $112,000.
3. Borrowers that are current, retired, volunteer, or non-paid:
- First Responders (police officer, firefighter, paramedic, public safety officer, emergency medical technician (EMT) or similar)
- Educators (Sunday school teacher, tutor, day care provider)
- Medical Personnel (nurse, doctor, phlebotomists, health ambassador, or hospital, American Red Cross worker, or similar)
- Civil Servant in a Federal, state or local municipality
- Military personnel
The minimum credit score required on the FHA 1.5% down payment loan is 620.
The maximum debt to income allowed is 48.99%. The new mortgage payment + your other minimum payments on any other debt you carry cannot exceed 48.99% of your gross, pre-tax income.
Eligible loan terms: 20, 25 and 30 year fixed loans.
What kind of property can I buy with the FHA 1.5% down payment loan?
Eligible properties covered by the 1.5% down payment FHA loan are:
- 1 to 2 unit primary residences
- Manufactured Housing
- FHA Approved Condos