It is a popular concept you need a 3% commitment in order to qualify for an FHA loan. Actually, it varies and can be closer to 2.25%.
That being said, it is important to know the required commitment can be in the form of a gift. It is also important to know it can be a gift from the seller.
Sellers can sometimes commit up to 10% to be applied to down payment, closing costs, and temporary interest rate buy downs. This is accomplished sometimes through a direct gift and sometimes gifts can be made from the seller to a non profit organization that then re gifts the funds to the buyer for a fee.
So you might wonder, why? The answer is simple. Some sellers truly need to get out of the house quickly and some homes have just been on the market too long. Typically, once a home is on the market 90 days, the seller drops the asking price around 10%.
It is more advantagous to pay 6% to the seller than to drop the price 10%.
Simple math!
So if you don't have a lot of cash in your pocket and think you can't buy, check again. You might be missing out on your dream home.
That being said, it is important to know the required commitment can be in the form of a gift. It is also important to know it can be a gift from the seller.
Sellers can sometimes commit up to 10% to be applied to down payment, closing costs, and temporary interest rate buy downs. This is accomplished sometimes through a direct gift and sometimes gifts can be made from the seller to a non profit organization that then re gifts the funds to the buyer for a fee.
So you might wonder, why? The answer is simple. Some sellers truly need to get out of the house quickly and some homes have just been on the market too long. Typically, once a home is on the market 90 days, the seller drops the asking price around 10%.
It is more advantagous to pay 6% to the seller than to drop the price 10%.
Simple math!
So if you don't have a lot of cash in your pocket and think you can't buy, check again. You might be missing out on your dream home.
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