FHA $100 Down Payment Program

When a Federal Housing Administration (FHA) loan goes into foreclosure status, the loan is taken back by FHA. As a lender, FHA is not in the business of owning and selling homes which provides an advantage to the buyer.  To sell the homes quickly, FHA has special offers for buyers such as the $100 loan program. This offer is only available to homes owned by FHA. Buyers who qualify for a FHA loan can take advantage of the program with a down payment of $100.  This is a benefit FHA has compared to other programs. Fannie Mae currently offers a similar program called Home Path however this program requires a larger down payment.

The FHA $100 down program is very simple. Buyers can go to MCB’s (Michaelson, Connor, & Boul, Inc) website: http://www.mcbreo.com/buyerselect.htm to search for home for sale by FHA.  MCB is FHA’s property manager. This website allows the buyer to search by City, County, listing price, and zip code for all FHA properties currently on sale in Arizona, Colorado, Michigan, Montana, Nevada, Ohio, Utah, and Wyoming. For additional states please visit HUD.gov. Buyers must be pre-qualified with an experienced FHA loan officer who understands the FHA $100 down payment program. Although it is easy for a buyer to locate a FHA home for sale, the loan officer must understand the process to ensure closing the loan on time. I highly recommend that buyers work with an experienced buyer’s agent.  FHA and MCB have a strict process to make offers on FHA homes for sell as well as financing for these properties. 

Once a buyer has located a property of interest, the buyer will need to know how to read the MCB listing because it is different than a MLS listing. The MCB listing provides the buyer the property address, sales price, size, number of bed/bath rooms and a picture like other listings however MCB provides additional information to the buyer.  

FHA Financing Section – This section informs the buyer how the property can be financed by a FHA loan.

·         Insured (IN) – This means the property can be financed with a FHA loan in its current condition with no required repairs. 

·         Insured with repair escrow (IE) – FHA has determined that repairs are needed prior to FHA insuring the loan. These homes may still be purchased without additional funds out of pocket.

·         Uninsured (UI) – Repairs needed to make this home FHA insurable are greater than what FHA will allow for a repair escrow.  These homes require too much work and will be purchased with cash or non-traditional mortgage.

203K Eligible Section – Informs the buyer if the property is eligible for a FHA 203K renovation loan.

·         For a property that is FHA Insured (IN) or Insured with repair escrow (IE), the qualified buyer can use a FHA 203K renovation to make improvements to this property. 

Eligibility Section – Provides buys with information as to who FHA is currently willing to sell the property to. FHA is a division of HUD and the main function of FHA is to help make affordable homes available to homeowners. Initially, FHA will take offers from buyers who will be using the property as a primary residence. After 10 days, FHA will allow bids from local government agencies, non profits agencies, and investors to purchase. See FHA Investor for more details

Escrow amount (repair escrow) – Amount required for improvements that FHA believes is needed to make the home meet FHA minimum property standards

·         To obtain a FHA loan the property must be in safe livable condition. 

·         The repair escrow is financed into the loan. After the purchase, the required repairs will be completed and paid for. Any funds left over after the repair escrow will be applied to the principle balance of the loan.

Special Comments - Provides important information about the property such as if the property is a Manufacture Home.

Escrow Information – Provides a breakdown of costs for each repair FHA requires making the home safe, livable and meet the FHA minimum property standards. After closing and repairs are completed, remaining funds will be applied to the loan balance.

An experienced agent can assist buyers in purchasing FHA homes. On average these homes sell for 10-20% less than surrounding homes in the area. FHA homes are a great value and with the $100 down payment program, these homes are affordable for anyone to purchase a home today.  The Energy Efficient Mortgage (EEM) can also be applied to FHA loans to cover cost of energy efficient upgrades.

The Good Neighbor Next Door program offers eligible law enforcement officers, teachers (K-12), firefighters, and emergency medical technicians special home financing. By purchasing a home with an FHA mortgage and financing all closing costs, eligible buyers can receive up to 50% off the listing price for certain HUD owned properties. The homes must be located in an area which has been designated “Revitalization Areas” by HUD.

Revitalization areas are neighborhoods which have low income (60% of the median household incomes for the metropolitan area or state), areas of high foreclosures of single family housing, or areas of low homeownership. The local Home Ownership Center determines the revitalization areas. By promoting homeownership in these areas, the primary goal for HUD’s Good Neighbor program will build stability in these areas. These homes may only require a $100 down payment and are not restricted to first time home buyers. The buyer must commit to living in the property for a minimum of 3 years. HUD requires a second mortgage for the discount amount. The second mortgage has no payments or interest due and is forgiven at the end of the three year term. This prevents buyers from moving and selling the property within the three year time frame. Properties in the revitalization areas are offered the discounted price for five days following the listing. Currently there is not a better value for a home in this marketplace. If the property requires repairs, FHA will allow for the repairs to be financed into the loan and repairs to be completed after closing.