F.H.A. has lowered the minimum amount of cash necessary for the purchase of a home. The new regulations state the buyer must have a minimum of 3% cash into the transaction. The 3% applies to the sales price or the appraised value, whichever is less. The actual down payment required on purchases of $125,000 or more is 2.85% and the remaining .15% would go toward closing costs.

The normal, allowable closing costs for the F.H.A. buyer are, of course, quite a bit more than this .15%. The main thing to remember is that the buyer can be approved with as little as 3% total investment. The rest of the costs can be negotiated in the agreement to purchase. In other words, the seller can pay the rest of the buyer's costs. In order to arrange a transaction like this, the buyers need to meet with their lender first so that all the numbers can be worked out and given to the real estate agent before they write the offer.

For example, a $150,000 sale could be worked out as follows:

SALES PRICE = $150,000

DOWN PAYMENT = $4,275

TOTAL CASH NEEDED = $4,500

The $4,500 total needed represents an almost 50% reduction in the amount of upfront cash needed by an F.H.A. buyer. There are several ways for the buyers to provide the money needed to close escrow. For example, all or part of the $4,500 mentioned above could be a gift from a relative. This, coupled with today's very low interest rates, makes it a perfect time for first time buyers to investigate owning their own home.

Compliments of CenCal Mortgage - 805/238-5626