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When FHA Requires Cash Reserves

We all know that FHA is going to require 3.5% downpayment in a few weeks (January 1) - but did you know that in some circumstances they also require the borrower to have two months of cash reserves?

If a borrower is applying for FHA financing and is relying on a NTMCR, (nontraditional credit), FHA Commissioner Brian D. Montgomery writes:

"Borrowers should have two months of cash reserves following mortgage loan settlement from their own funds (no cash gifts from any source should be counted in the cash reserves for borrowers in this catagory)."

As a general rule, if you're applying for an FHA loan and you don't have a ton of credit references, I would make certain that your loan officer is aware of this. The good news is that as a First Time Homebuyer you might qualify for an Interest Free $7500 tax credit from Uncle Sam! It's a GREAT time to buy real estate - this is just one of those "little" changes that you want to check out up front!

If you are considering a home purchase in Cary, or buying real estate in Raleigh, please call Steve and Eleanor Thorne, River Community Bank, 919-649-5058

Posted by Eleanor Thorne 919-649-5057 Cary Mortgage Loans on 08/25/2008 03:41 PM

Comments (2)

fha, mortgage loans, tax credit, no credit, downpayment, cary nc, mortgage rates cary, raleigh

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2 Comments on When FHA Requires Cash Reserves

JUN

2010

Iam trying to buy a home with my mom she has 790 credit score I have 614. She has no income but 250,000 in cash I have a gross income of 8250 a month. We are going for fha because of my credit, The mortgage amount with mip and all other fees is 405,000 Total debt and mortgage P&I is 48%. I am concerned , but feel with 150,000 as down payment and apprx 1 year reserves we should be ok. My income is from disability which will go up and stable.All major credit hits from 2004,some other small lates here and there no bankrupcy or things like that. Do you think I will be ok???

Tom

Tom - you are obviously not purchasing in NC - because our loan amounts will not go that high. It's difficult to say, but normally underwriters will not go to 48% on the "first" ratio... Does your mom have income? Is that being calculated in? Call me directly and I will be glad to answer your specific questions as I can. Thanks!

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