1. Sweat Equity - This is where labor or materials have been supplied by the home buyer prior to the close of escrow.
2. Secured Loans - Check with your 401K. Loans secured against a 401K are not considered in the debt to income ratios on an FHA loan. Also, some investment accounts will allow loans for down payment.
3. Trade Equity - If you own a boat, or maybe a classic car, it can be traded and counted towards the total cash required.
4. Gift Funds - Gifts can come from family or very close friends who have no financial interest in the property. Even an employer can potentially give a gift.
5. Loans from family - These can be either unsecured or secured against the property. The payment from a family loan is included in the debt to income ratios.
6. Rent Credit - Also known as a lease option, a portion of the rent paid can be credited towards the down payment. The catch here is that the amount credited is the amount of rent paid that is above the going market rent price.
7. Commission from sale of the home being purchased - If the Realtor representing the home buyer is a close family relative, then the agent can credit a portion of, or all of, the commission from the sale of the home back to the home buyer to be used for down payment or closing costs.
8. Sale of Personal Property - this is similar to Trade Equity, except that the boat or classic car is sold prior to closing escrow. Verification of the actual value of the item being sold will be required.
9. Bridal Registry Accounts - This is where a bank account is opened before the wedding, allowing friends and family to deposit gifts directly into the account. This can add up fast.

An important thing to remember is that an FHA loan is a Full Documentation loan. Everything will need to be thoroughly documented. Many times first time buyers will think they have found a loop hole in the guidelines, allowing them to quickly get their down payment funds together. But the lender will review the most recent two months bank statements. Any unusual deposits that cannot be attributed to payroll will need to be documented.  For example, if a potential home buyer deposited a $500 check into their account last month, that deposit will need to be verified. A cancelled check and explanation letter will be required. The lender needs to make sure the homebuyer is not getting credit card advances to help with the funds needed to clolse escrow. Cash deposits are a no-no. Cash cannot be verified and cannot be used towards the verified funds required to close escrow.

Before a First Time Buyer starts to look at homes, they should first talk to a Orange County, CA Direct FHA Lender who can guide them through the loan process. It is important to not only get PreApproved for an FHA loan, but also to get advice that will help the purchase close smoothly.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

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Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

* Licensed by Department of Corporations under the California Residential Mortgage Lending Act. PRMI Branch License 813F487.