QUESTION: What is the new cash requirement for down-payments on FHA home loans?

ANSWER:  Borrowers must pay, in cash or its equivalent, 3.5% of the appraised value of the property. This means that borrower must provide a 3.5% down payment on purchase money mortgages. Borrowers must come to the closing table with 3.5% cash. New home-buyers seeking FHA home financing can no longer accept seller-funded down payments.

QUESTION: When does this new cash requirement for down-payments take effect?

ANSWER:  It is unclear at this time. Currently, FHA indicates that while the provision appears to be self implementing as of the date of enactment, under case law, the effective date is dependent on issuance of FHA guidance. FHA Down Payment Assistance Loans have many new restrictions.

QUESTION: Does HERA prohibit seller-funded down payment assistance and if so what is the effective date of the new prohibition?

ANSWER:  HERA prohibits seller-paid down payment assistance although it does permit such assistance from family members. The prohibition against seller funded down payment assistance applies to those loans for which the lender has issued credit approval for the borrower on or after October 1, 2008. This means that if a FHA mortgage lender issues credit approval before October 1, 2008, seller funded down payment assistance is permissible.  Information source – Mortgage Bankers Association