FHA Loans Offering No Money Down Purchase Financing?

by Loan Officer Chris Goulart 

Yes, no money down financing is still alive in these days of tightening lending standards!  The Nehemiah program, in conjunction with an FHA loan can help a potential homebuyer obtain a home loan with no money out of pocket.  FHA guidelines state that you must have 3% of your own money into the deal through down payment and closing cost funds, but FHA also allows you to receive a gift that can be used for both your down payment and closing costs. This gift can come from either a family member or a non-profit organization (such as Nehemiah).

Nehemiah is a program that allows the seller to contribute up to 6% of the purchase price.  This contribution can be applied towards the buyer's down payment and closing costs. They charge a small processing fee for this service. This fee can be paid by the seller, buyer, or even the lender. You can also combine that 6% gift with the seller contributing up to another 6% as seller contribution.

Under this program, the seller agrees to pay Nehemiah the amount of the gift at closing.  Nehemiah brings the funds in as a gift, and that money never has to be repaid by the buyer.  There are no income limitations to this program, a buyer only needs to be approved for the FHA mortgage and be working with a seller willing to participate in the program.

Some other benefits of FHA loans include expanded credit requirements, higher loan to values than conventional loans on the market today (up to 97%), and excellent rates.  Additionally, if a borrower does not qualify for the loan with their income, you can add a non owner occupant borrower to the loan to help with the qualification.  This non owner occupant borrower can be a family member or another person whom the borrower can demonstrate a family type of relationship with.

Some recent changes made have opened FHA programs to many borrowers who may not have been able to access them only 6 months ago.  One of the biggest changes has been an increase in the loan limits.  These loan limits are now set county by county, making FHA loans a viable option in high cost areas (such as California).  Take a look at this article for the new loan limits by county for California.  These limits are only temporary for the time being, but there is legislation in the works right now that may extend or make these limits permanent.

FHA offers some great programs for both home buyers and existing homeowners looking to refinance.  FHA was a program created in the depression era to help bailout the housing issues of the 30's.  Once again FHA is poised to become the government's tool to help stabilize the mortgage and housing industry issues we are experiencing currently.

About the author

Chris Goulart is a direct hard money lender for transactions that fall outside of the conventional lending box. He authors a california mortgage blog full of insights into the loan and real estate industry.


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