If you want to buy a house with an FHA loan, you better hurry! And I mean HURRY. As of October 1st, the down payment assistance that a seller can contribute is going way, bye bye, outta here. Also, the minimum down payment requirement for those seeking an FHA loan will increase to 3.5% from 3%.
It looks like financing is going to get a little harder to come by. Under current federal rules, only a charity, a family member, or an employer can provide a down payment as a gift. That is, if you’re seeking a mortgage insured by the Federal Housing Administration. Of course, those rules spawned a whole industry of “down payment assistance” charities. Those “charities” gifted down payment assistance to buyers, but then were reimbursed by the seller. In May 2006, the IRS ruled that these “charities” funneled money from the seller to the buyer, and in the process, collected fees, so therefore could not be considered a “non-profit” orginization.
The new housing bill will put an end to seller financed down payment assistance programs. This will start in October.
Officials at HUD have stated that those buyers obtaining loans with down payment assistance programs had higher default rates. Ya’ think?
Builders in many parts of the country, have been relying on those down payments assistance programs to boost their home sales. Some builders are crying foul over the new housing bill, saying that the housing bill will in fact do more harm than good.
