What is the FHA $100 Down Program?
This specialty FHA mortgage was created to remove some of the barriers to home ownership, and make it easier to purchase HUD homes. HUD homes are one to four unit properties owned by the US Department of Housing and Urban Development (HUD) through foreclosure. The previous owners had financed the properties with FHA insured home loans, and following foreclosure proceedings ownership transferred to HUD.
Anyone including investors can purchase a HUD home, but priority is given to those who will live in the property as a primary residence. When the home first becomes available for sale there is a period of time during which only owner-occupant buyers can bid on the listings, and in addition, buyers who will live in the home can also take advantage of the FHA $100 Down mortgage program.
Available exclusively for the purchase of HUD homes, this specialty FHA program allows for a down payment of just $100. In the standard FHA loan the minimum down payment for a purchase is 3.5 percent. The extremely low, $100 down payment option opens up home ownership opportunities for many consumers who might not otherwise be able to afford it.
FHA $100 Down Basics
- Purchase Only
- 10, 15, 20, 25, and 30 year fixed and 5/1 Hybrid ARM options
- The $100 down payment incentive must be included on the executed sales contract
- Eligible properties include 1 – 2 unit homes, manufactured homes, condos, and PUDs
What are the benefits?
Very Low Out Of Pocket Expenses
With only a $100 down payment requirement this is very close to a no money down program. Lowering the upfront costs means that home buyers don’t have to have a large amount saved in order to qualify for the purchase. They are still required to meet income standards to show that they will be able to afford the monthly mortgage payments, but this program eliminates the burden of a large amount down.
Can Combine Programs to Pay for Repairs
It’s not uncommon for foreclosed properties to be in need of repairs. Buyers concerned with minimizing out of pocket expenses are likely to not have extensive funds available for fixing up a home, and the sale will not be approved if the property doesn’t meet the FHA’s standards for health and safety.
So what happens if the home needs work in order to qualify for the $100 Down program but the buyer can’t afford to pay for it? There is a solution. The $100 Down mortgage can be used in conjunction with the FHA 203(k) loan or the FHA 203(b) Repair Escrow, both of which allow the borrower to finance both the purchase of the home and the cost of repairs, updates, or renovation.
Who is eligible for the $100 Down Loan?
In order to qualify for this program the home buyer must be purchasing a HUD home to be used as his or her primary residence. Additional requirements include:
- Buyer must submit a full price offer
- Cannot have purchased a HUD home within the preceding 24 months
- 600 minimum FICO score
Borrowers will also need to meet the income, asset, and minimum property standard requirements specified by the FHA.
In which scenarios is the FHA $100 Down Mortgage useful?
Though fairly limited in its scope, this program can create big opportunities for those looking to become homeowners but without a lot saved for a down payment. Even when funds are available home buyers may opt to put a small amount down and reserve those savings as an emergency fund, for long term retirement or education savings, for another investment, or some other purpose.
Depending on market conditions there may not be a wide selection of HUD homes available in a certain area at any given time. Current listings can be viewed online at hudhomestore.com. Consumers hoping to take advantage of buying a property at a reduced price and the $100 Down option may want to search for new listings frequently or work with a real estate agent who specializes in HUD homes and foreclosed homes.
History of the FHA $100 Down Program
Vacant and abandoned properties tend to negatively impact the communities in which they are located. When a home goes through foreclosure and its previous owners move on, it can sometimes take a while before the process is completed, the property sold, and new owners take occupancy.
In the meantime homes may deteriorate, not be adequately maintained, and fall into disrepair. Vacant properties are also linked to an increase in crime rates and a decrease in property values.
In an effort to speed up the rehabilitation and reintegration of HUD owned homes as safe and affordable long term housing, the Federal Housing Administration seeks out ways to make buying these homes easier, and less costly. One perfect example is the $100 Down program.
Can you refinance a home with the FHA $100 Down Program?
Because this is a purchase only program there is not an option to refinance an existing mortgage with the $100 Down mortgage. Low equity refinance products include the FHA 203(b) home loan, FHA Streamline Refinance, and VA Interest Rate Reduction Refinance Loan.
Other Programs to Consider
If the FHA $100 Down mortgage doesn’t work for a specific situation here are a few other products to explore:
- To purchase a home or take a large amount of cash out through a refinance: FHA 203(b)
- To finance home improvements or renovations: FHA Standard 203(k) Rehabilitation Loan
- Streamlined refinance option for those with VA eligibility: VA Interest Rate Reduction Refinance Loan (IRRRL)