If I Was Going To Use An FHA Loan To Buy A Home... 

...I would be looking at the 3.5% down option

FHA Loans have been around since 1934

They are sometimes called a 1st Time Buyer Loan

The fact is that they are available to anyone

But with the low down payment it

is particularly attractive to 1st timers

Sellers are allowed to help the buyers with closing cost assistance

which lowers the barrier to make a home purchase

most common is a 3% credit that can be used for:

• closing costs
• prepaid items such as insurance
• interest rate buy down

lets examine a scenario where the purchase price is $300,000

the down payment would be $10,500 ($300,000 x 3.5%)

and if the seller is crediting the buyer 3% of the purchase price at closing

$300,000 x 3% = $9,000 credit

so the actual $$$ to the seller is $291,000

before they pay commissions/closing costs

the buyers lender will do an appraisal and it will need to come in at $300,000 or higher

if the appraisal came in lower, such as $295,000

the bank would only be able to lend based on that amount

this situation could be resolved in a number of ways:

• the buyer could pay the $5,000 down payment gap in cash at closing
• the buyer could ask the seller to lower the price by $5,000
• the seller could reduce the price $5,000 and reduce the credit $5,000
• they could each contribute toward the $5,000 

Listen in to today's show for all the details