When the FHA Home Loan program in North Carolina went to a 3.5% down payment requirement in January of 2010, they made a few other subtle notices. One of those guideline changes had to do with cash reserve requirements from the borrower.
Cash Reserves refers to the money we can document that a borrower has left in their checking or savings accounts after closing. The documented money must be “liquid” meaning we can’t count money that is held in Stocks or a 401K where they would be penalties for with drawing… or in the case of Stock, could be worthless tomorrow afternoon.
In most cases, for a Conventional Loan – we are required to have at least 6 months of principal, interest, taxes and insurance left over after closing on the home. Prior to the notices recently, FHA Home Loans did not have any requirements that you have even $50 in the bank after closing.
FHA Home Loans, according to FHA Commissioner Brian D. Montgomery will begin requiring cash reserves when someone is relying on nontraditional credit to qualify for a mortgage.
“Borrowers should have two months of cash reserves following mortgage loan settlement from their own funds (no cash gifts from any source should be counted in the cash reserves for borrowers in this category).”
As a general rule, if you’re applying for an FHA loan and you don’t have a ton of credit references, I would make certain that your loan officer is aware of this. The good news is that as a First Time Home buyer you might qualify for an Interest Free 3% Grant for your down payment from Uncle Sam! It’s a GREAT time to buy real estate – this is just one of those “little” changes that you want to check out up front!
FHA DownPayment Requirements: If you are purchasing a “regular” house (not a distressed home), FHA requires a 3.5% down payment. The down payment can be a gift, it can be from the sale of an asset (we had one borrower sell a bass boat so he could buy a house), savings and… if you qualify for NC Housing Finance Agency money- up to 3% of this can be given to you by the Government (with a few strings attached of course). If you are purchasing a DISTRESSED / read FHA Owned Foreclosed Home – you might want to ask us about the $100 Down program that FHA Home Loan Program offers.
If you are considering a home purchase in Cary, or buying real estate in Raleigh, please call Steve and Eleanor Thorne, Mortgage Banker in Cary , 919-649-5058