FHA Down Payment - Option 1

Here's a question I get from time to time: "My borrower wants to use cash for his down payment. Will this be a problem?"

The answer to the question is, "Yes," but here's the deal. Cash saved at home (aka cash-on-hand; mattress money) can be used for their down payment and closing costs, however, a word of CAUTION -- if they DO have checking and/or savings accounts, a lender is less likely to allow money from under the mattress. I have done this before and the underwriter asked my client for a written statement stating that he did not have an account at any bank.

Be careful though. I would then ask how much money does the borrower need for a down payment. $10,000? Per the guidelines, we must determine the reasonableness that this money was judiciously saved based on the borrower's income, the period of time the funds were saved, overall spending habits, and use of financial institutions in general. We must also verify the actual money by seeing it either properly deposited into a financial account or given to the title company in anticipation of closing.

Next time we will look at another down payment option outside of the norm. Til then....

Hope for Homeowners - Part II

As promised in my previous post, I will now provide you with the final two bullets published by HUD in their FACT Sheet for H4H training manual. They saved these 2 for last for a reason - they are not reasonable criteria in my mind.

In order for Congress to sign off on this program, according to the powers that be, they had to add these requirements:

• Homeowners must agree to share both the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.

• To participate, existing subordinate lenders must agree to release their outstanding mortgage liens.

OK, class. I mean, really. Would anyone want to give the government 50% of your equity after 20 long years? Probably not. Is this really a fair criteria? No. I say there are more options if you need help on your mortgage due to hardship, better options that I will discuss in the next post.

As for the second lien holder. IF you participate in this program and IF you're lucky enough to have your 2nd lien holder release you from your obligation, know that you are lucky indeed. When someone in the session stood up and asked which mortgage companies were doing the latter--the FHA/HUD trainers had no response. Counselors and other participants to this training companies spoke openly about the unwillingness of lenders to approve this program.

So, as I stated in Part I--back to the drawing board. Surely there's a better solution..