Profile picture for user48359712

Pre-approved but NO down payment.

I was preapproved for a FHA loan and the Credit Union is stating that I might need 3% down payment. In this crazy world that we all live in that might not seem like much at all but I do not have 3 %, now I know what your thinking (possibly) and yes I can afford the mortgage payments, but I do live on ever red cent I make.

My question is....as a first time home buyer do I have to have the 3% down payment? Is there any type of programs out there that would assist a buyer with funds to get me  in a home. I have looked through a few Grants but I'm not sure I'm even in the right  place. I've  looked for that information/guidance/assistance etc...but can't seem to come up with information that will move me in the right direction.

Any assistance will be much appreciated,

Thank you
Stephanie
  • July 03 2013 - Rochester
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Answers (11)

Profile picture for user7980779
Huskers, "Both of these statements cannot be true at the same time. If you don't have verified funds to close, you are not truly pre-approved for anything."

Not true, pre approval is not approval. I was pre approved without the funds. 

I am saving the money now and will easily have the 3.5% and more for cash reserves from today until October 17. Proof of savings will be shown from now until then via my monthly submitted bank statements.
  • July 25
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Stephanie, you have received a lot of sound advice on saving funds, which is great and definitely recommend as you would need 3.5% down in order to be pre-qualified for an FHA loan. The only options I'm aware outside of this, are:

1) You may receive a gift for the down payment from a family member

2) There may be some local or state down payment assistance programs in your area.  Try searching down payment assistance in your area on google and you may find some programs :)
  • July 23
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Profile picture for wetdawgs
Sorry to hear of this frustrating situation.

I'm sorry to hear that your lender lead you astray by giving you a pre-approval when you'd not yet saved up 3.5% down payment plus closing costs.

House ownership can have some financial surprises, roofs leak, furnaces and water heaters die, paint peels.  If you aren't saving a single red cent,  you aren't ready to buy.  Put together a strategy to save, and over the next few years you may be ready to buy.   Buying isn't for everyone.

  • July 03 2013
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Profile picture for Go Huskers
"I was preapproved for a FHA loan"
" I do not have 3 %, now"
-------------------
Both of these statements cannot be true at the same time. If you don't have verified funds to close, you are not truly pre-approved for anything.
  • July 03 2013
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When funds for purchasing are tight/non existent, a good excerise is to  take the new total mortgage payment and subtract your current rent. If you are not currently saving $200+ over that amount one is not ready to buy a home regardless what a lender/agent tells you.
  • July 03 2013
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Hi Stephanie,

You have already received some sound advice. It's a good idea if you have some savings before you make a purchase. What happens if something goes wrong and you have no money to fall back on?
 
Yes, an FHA loan requires a 3.5% down payment. It's possible that you can have a family member gift you some of the money. This will require a paper trail and gift letter, but it's pretty standard and your lender will tell you what is required for the gift.

But there are other things to consider as well. You will need money for your closing costs. These are paid at the closing along with your down payment. It covers costs to the lender and title/escrow companies. In a buyer's market, a seller may be willing to pay your closing costs, because it's the only way he will be able to sell his home. But in this current market, many cities are experiencing high demand and low inventory, giving sellers the upper hand. And more likely than not, they will not pay a buyer's closing costs. Why would they when they can just accept another offer from a buyer who is not asking them to do so?

Plus, with an FHA loan comes impound accounts. The lender sets up an account for you at closing. Each month with your mortgage payment, you make monthly installments into this account for your taxes and insurance. This is actually a great thing for you, because it will allow you to budget for taxes and insurance on a monthly basis rather than have to come up with a lump sum once or twice a year. However, depending on the time of year that you buy your home and when the taxes are due, you have to make a larger initial contribution into this account at closing. It can be anywhere from 3-6 months - maybe even more - so that there is enough money in this account to make your first tax payment on time.  

With that being said, each state has their own loan programs. You can go to http://www.wshfc.org/buyers/ to read about some loan programs in Washington. And then you can check out http://www.wshfc.org/buyers/HomeAdvantagedpa.htm for more information on their down payment assistance programs.

Also try HUD's web site:
http://portal.hud.gov/hudportal/HUD?src=/states/washington/homeownership/buyingprgms

I wish you the best of luck with your first purchase. I encourage you to save more money and don't over extend yourself. But you can definitely use some of the outlets mentioned above to assist you as well.
  • July 03 2013
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Unfortunately for the FHA loan you will nee a 3.5% down, but there are other possibilities.  I would start talking to another lender.

Ask about VA, and USDA as options, and down payment assistance programs.

I would definatley do some more homework and also talk to at least a few more lenders.  Find a good loan officer at a large lender, such as Jeff Devlin at Wells Fargo, just up the road on the Westside of Olympia, and also, find a good mortgage officer.  If you need help, give me a call, I know a few local folks.
  • July 03 2013
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Profile picture for sunnyview
Yes, in almost every case you will need a down payment of 3.5% for FHA unless you qualify for a 0 down VA or USDA loan. If your lender did not discuss that with you, I would look for another lender.

If you do not have any savings and are "living on every red cent" you make, you should not be looking to buy yet. That may not be what you want to hear, but it is the truth. Anyone who tells you different is doing you a disservice.

You can buy, but you need a savings plan for closing costs, a small down and a small emergency fund. When you buy it is great, but you need to have a reserve for basic things that go wrong since as the owner you no longer have a landlord to make repairs. There is a lot of good information out there. Zillow has a buyer' s roadmap and so does about real estate. Hope the links help.
  • July 03 2013
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Hi Stephanie,

While I cannot speak for your CU, I suspect the originator implied that you could get a gift of the 3.5% downpayment for the FHA loan.    While it might not be a solution for you, down-payment gifts are VERY common with FHA loans.

Regarding grant programs, my experience is that an experienced agent specializing in First Time HomeBuyers would be your best resource to learn if any grant programs exist.
  • July 03 2013
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FHA requires 3.5% of the contract price.

Would you be VA eligible?
  • July 03 2013
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Profile picture for Outer Banks N C
Maybe buying now is not an option for you. I would suggest cutting back here and there for awhile until that 3.5% down payment is reached. It takes some will power but if owning your own home is a goal you really want it might be worth the sacrifice for the time needed to save it. Owning a home is not a buy it and never have another thing to do but make the payments, stuff breaks and needs repairs. Having some savings is critical.

good luck
  • July 03 2013
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