How FHA Buyer’s Choice Can Help You Buy a Home with No Money Down

Blog posted On February 16, 2023

When it comes to buying a home with 0% down, USDA and VA have dominated the conversation. Now, we’ve brought FHA into the chat. Through our FHA Buyer’s Choice down payment assistance program, you can buy a home with an FHA Loan and pay little to no down payment or closing costs. Unlike USDA and VA Loans, this program is available to everyone – no locational, military, or first-time buyer requirements.

FHA Buyer’s Choice: What is it?

FHA Buyer’s Choice is a down payment assistance program that offers buyers up to 5% of the home purchase price or appraised value (whichever is less). It allows for up to 101.50% LTV, meaning you can use it for your entire down payment and still have money left over to pay for closing costs!

This program must be used with an FHA Loan. It comes with two down payment assistance options:

Option 1: 5-year forgivable option

Overview

• The funds from this option can be used towards a down payment and/or closing costs and they can be fully forgiven after five years.

Benefits

• The 5-year forgivable option has obvious perks. The main perk is that you won’t be required to pay it back (if you remain in the house). The other perk is that it allows for lower credit scores than the 10-year second lien.

OR

Option 2: 10-year repayable second lien

         Overview

• Like the 5-year forgivable option, this second lien can be used for a down payment and/or closing costs, however the funds must be paid back over a ten-year period.

Benefits

• Some might ask ‘why would you choose to pay money back if you could just do the five-year option?’ Simple: if you choose the 10-year repayable route, the interest rates for the first lien are lower than the five year.

Benefits of FHA Buyer’s Choice

• 101.50% LTV – You can buy a home with no down payment and little to no closing costs
• 5-year option can be forgivable
• Lower interest rates with the 10-year option 
• Can be used with a 2-1 temporary buydown (or permanent buydown) – which can lower your monthly payment even more
• No first-time buyer requirement – repeat buyers can benefit!
• No income limit requirement
• Available in all states

FHA Buyer’s Choice vs. other down payment assistance programs

There are several unique factors that make FHA Buyer’s Choice stand out from other down payment assistance programs. One is that there are fewer restrictions. More people can qualify for Buyer’s Choice because there are no state, income, or first-time buyer requirements. Most down payment assistance programs have one or more of those restrictions. Of course, eligible buyers will have to meet other typical FHA Loan criteria. Another huge benefit is the loan-to-value. Buyer’s Choice can cover your down payment costs completely and still leave you with extra money to use towards your closing costs. Finally, the 10-year option with lower interest rates is a big advantage, as is the money of the five-year option.

FHA Loan Overview

FHA Buyer’s Choice down payment assistance has to be used with an FHA Loan. An FHA Loan is a government loan that allows for down payments as low as 3.5%*. Besides the low down payment requirement, FHA Loans are beneficial because of their lenient credit score requirements. They’re especially popular among first-time home buyers, but it’s not a requirement – anyone can use an FHA Loan as long as they are purchasing a primary residence property. Though they do come with mortgage insurance premiums (MIPs), FHA Loans can be very useful, especially when paired with programs like FHA Buyer’s Choice.

If you’d like to learn more about FHA Loans or FHA Buyer’s Choice, let us know!

*FHA Payment example: If you bought a $350,000 home with a down payment of 3.5%, for a loan amount of $ 343,661 (including 1.75% FHA Funding Fee), on a 30 year loan at a fixed rate of 6.5% (7.322% APR), you would make 360 monthly payments of $2,172.00. Payment stated does not include taxes and insurance, which will result in a higher payment.