Beware of Down Payment Schemes Not Permitted by HUD
Monday, November 10, 2008
As mandated by the Housing and Economic Recovery Act of 2008 (HERA), as of October 1, the Federal Housing Administration (FHA) stopped accepting seller-funded down payments.
The National Association of Realtors (NAR) recently issued a report warning about programs being created to get around this new requirement. Some are being set up as earned-income programs where a buyer asks a seller to enroll in a “property alliance” for a fee, NAR explained. An administrative cost is paid to the program, and the fee goes to the buyer as a commission that can, in theory, be considered earned income.
Although the Department of Housing and Urban Development (HUD) does recognize earned income, such programs are not considered legitimate means for meeting the new down payment requirements for FHA-insured mortgages, NAR said.
The National Association of Realtors (NAR) recently issued a report warning about programs being created to get around this new requirement. Some are being set up as earned-income programs where a buyer asks a seller to enroll in a “property alliance” for a fee, NAR explained. An administrative cost is paid to the program, and the fee goes to the buyer as a commission that can, in theory, be considered earned income.
Although the Department of Housing and Urban Development (HUD) does recognize earned income, such programs are not considered legitimate means for meeting the new down payment requirements for FHA-insured mortgages, NAR said.
