Since FHA has done away with seller funded down payment assistance programs, some buyers that would otherwise have qualified (or would otherwise have chosen to keep their money and roll the down payment into the sales price) have been looking for other options to come up with their 3% down payment.  FHA is still quite often the loan with the best combination of lowest down payment, lowest monthly payment and best interest rate, especially for those with a less than perfect credit score and that have little money to put down. 

100% Conventional Financing is still available, but the guidelines are more strict than FHA in many instances, and the Conventional program requires an automated underwriting approval.  VA loans are also still available with zero down to qualified veterans, and zero down USDA loans are available in rural areas, but there are strict income limits. 

So if you can't qualify for any of these 100% options, there may be ways you haven't thought about to come up with the 3% down payment (which will be 3.5% beginning January 1, 2009). 

Here are some ideas for coming up with the 3% dow payment that many people may not have considered: 

• GIFT FROM FAMILY MEMBER

FHA allows an immediate family member to provide gift funds for down payment and/or closing costs.  The donor is required to sign a letter stating the money is a gift and no form of repayment is expected.  FHA also requires documentation of the transfer of funds and proof of the donor's ability to give the gift (bank statement with sourced and seasoned funds and paper trail of money transfer).

• SECOND LIEN FROM FAMILY MEMBER

FHA now allows family members to provide a loan for the down payment.  The loan must be secured as a lien on the property and the terms of the loan must be disclosed.

• GIFT FROM EMPLOYER

FHA allows employers to provide a gift for down payment. 

• THE BORROWER MAY SELL AN ASSET

If a borrower owns an asset, such as a car, boat, camper, etc., the asset can be sold and used as down payment.  A paper trail of documentation must be provided.

• THE BORROWER MAY BORROW MONEY FROM AN ASSET, SUCH AS 401K, CAR OR CASH VALUE LIFE INSURANCE POLICY. 

FHA allows borrowers to borrow against assets they own, including vehicles, other personal property and assets, such as 401K and retirement funds.  If the loan is secured with non-monetary assets, such as a vehicle, the monthly payment must be counted in the debt-to-income ratio.

• A GOVERNMENT AGENCY MAY PROVIDE A GIFT, GRANT OR SECONDARY FINANCING

There are many different government sponsored and funded down payment assistance (grant) programs where the money does not actually come directly from the seller (all seller funded down payment assistance is not allowed).  This can come from a Federal, State or other local source.  Many cities and counties have bond programs, and there are other special programs available for firefighters, teachers and police officers.  Many of the bond and grant programs have various income and property restrictions, and may be very difficult to obtain in certain circumstances.  They may also have to be paid back if the buyer occupies the property less than five to ten years.  These programs should only be used if there are no other alternatives to down payment for these reasons. 

• A FAMILY MEMBER THAT IS A REAL ESTATE AGENT CAN GIVE THEIR COMMISSION AS A GIFT

If you have a realtor in your immediate family (parent, sibling, etc.), they may give their commission as a gift for down payment.  This must be agreed to in writing up front (written into special provisions) by all parties.