There have been many changes to the Federal Housing Administration (FHA) loan program in recent years. To keep Washington State home buyers informed, we have been publishing a series of blog posts about current FHA requirements in 2017.
Today, we will look at FHA down payment guidelines and requirements for Washington State home buyers.
What Is an FHA Loan?
An FHA loan is simply a mortgage loan that is insured by the federal government. The program is managed by the Federal Housing Administration, which falls under the Department of Housing and Urban Development (HUD).
Because these loans are insured, mortgage lenders are able to offer more flexible qualification standards including a lower down payment. The FHA loan program has been operating since the 1930s.
Down Payment Requirements in Washington State
The FHA down payment requirements for Washington State home buyers are fairly straightforward. Borrowers who use this program to buy a house are required to make a minimum investment of 3.5%. That means they can finance up to 96.5% of the home’s purchase price.
The 3.5% down payment option is partly what attracts home buyers to this program. First-time buyers with limited funds saved up for a down payment often use FHA loans as an alternative to conventional mortgage financing.
Gifts Are Allowed from Family, Friends, etc.
One of the benefits of using an FHA-insured mortgage loan is that you can obtain down payment gifts from family members, or from other approved donors. This is where another person (or organization) gives you money to cover some or all of your down payment. So it doesn’t necessarily have to come out of your own pocket.
Other Things You Should Know
The down payment is just one FHA loan requirement that Washington State home buyers should know about it. This program has other qualification criteria as well.
There are limits to the amount you can borrow when using an FHA loan to buy a house. In Washington State, the FHA loan limit for a single-family home ranges from $275,665 (in most counties) to $592,250 in the more expensive places like the Seattle metro area.
Additionally, borrowers must have a credit score of 580 or higher to qualify for the 3.5% down payment option. This is a risk-management requirement established by HUD.