Real Estate · March 5, 2020

3 Tricks to Arrange a 3.5% Down Payment for an FHA Loan



Owning a house is the biggest dream for Americans. But the down payment that one needs to come with for purchasing a home makes owing property a pipe dream for many. While most of the home loan programs need 20% down payment, Federal Housing Administrations (FHA) loans, need only 3.5% down payment. Though the percentage is much lower, but still you have to make the down payment.

Are you wondering how to prepare you for an FHA loan with 3.5% down payment? Here, we have put together a few ways for you.

Supplement your job with a part-time income

Nowadays, mortgage lenders require income verification and a debt-to-income ratio of more than 43%. The DTI ratio is a metric, which measures how much of your monthly gross income goes to paying debts. For example, if you have $5,000 in gross income and you pay debt payments totaling $1,500 per month, your DTI is 30%. It is difficult to get a loan with less than a 3.5% down payment. Even if you manage it somehow, you have to pay a higher interest rate over the life of the loan that you would obviously like to avoid. As a result of the more strict income requirements, you should try to look for a part-time job that will supplement your income. Put the extra money for savings that you can later use for making a down payment.

Sell some of your belongings

If you are planning to buy a house, then you will typically have a lot of stuff that they have acquired along the way. Those things may seem worthless to you, but the old car in your garage or the piece of furniture might be what someone else is interested in buying. Selling used goods can help you to get the much-needed cash for the down payment. So, sell unnecessary things and ensure some cash.

Ask for a gift from your family

Asking for money to your family members or friends may not seem an ideal option for you. But if you have a lovely grandparent or a sweet cousin, who has a lot of cash, then it will be a win-win for both of you. If they gift you some or all of your down payment, you can buy the house and they can get a tax write-off from it. So, it will good for both of you.

Consider this real-life example, where a house was sold on 12/10/2019 at 3614 Braewin Ct, Houston, TX 77068 for $267,500 with 5 bedrooms and 3 bathrooms and the size of the home is 3,613 Sq Ft. With an FHA home loan program, the down payment would be only 3.5% or $9,363 and the loan amount is $258,138 and the cash to close including closing costs could be $12,009.01.

Once you arrange the down payment, do you want to know how much home you can qualify for? Using a custom-designed mortgage calculator for the FHA Loan program can help you with this. Visit https://www.clearlending.com/en/calculator to know it and then apply for the loan program.

Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.