Minimum Down Payment Using $100 Down Sales Incentive

Yes, you can combine the $100 Down incentive with a Repair Escrow under Section 203(b), provided the repairs are minor. The property must be listed as “Insurable with Repair Escrow,” meaning the repairs required to meet Minimum Property Requirements cost no more than $10,000. In this case, the borrower creates an escrow account at closing to fund the repairs. The loan amount is calculated by adding 110 percent of the estimated repair costs to the Adjusted Value and then subtracting the $100 down payment. The total escrow cannot exceed $11,000.

Yes, the Good Neighbor Next Door (GNND) program often utilizes the $100 down payment feature. GNND allows eligible law enforcement officers, teachers, firefighters, and emergency medical technicians to purchase specific HUD REO properties at a 50 percent discount. When these borrowers use FHA-insured financing, they can purchase the home with a minimum down payment of only $100. While GNND includes a significant price discount that the standard $100 Down incentive does not, both programs leverage the specific loan calculation logic of subtracting $100 from the Adjusted Value (or discounted purchase price).

To properly originate a loan using the 100Downincentive,lendersmustfollowspecificdataentrystepsintheFHAConnection(FHAC)system.Whenorderingthecasenumber,theMortgageemustselect“RealEstateOwnedw/Appraisal”astheProcessingType.Additionally,withintheFHACInsuringApplication,thereisaspecificfieldlabeled”100 REO Down Payment Program.” The lender must enter “Yes” in this field to indicate the borrower is utilizing this specific sales incentive, ensuring the system validates the loan with the reduced down payment requirement.

Generally, no. The $100 Down sales incentive is targeted toward owner-occupant borrowers to encourage homeownership and community revitalization. Investor buyers purchasing HUD REO properties are subject to different financial requirements. Specifically, investors are restricted to a maximum Loan-to-Value (LTV) ratio of 75 percent. This restriction requires investors to provide a down payment of at least 25 percent of the Adjusted Value, which negates the ability to utilize the $100 down payment option. Furthermore, investors are generally ineligible for Section 203(k) financing, which is often paired with this incentive for properties needing repairs.

The primary document establishing eligibility for this incentive is Form HUD-9548, “Sales Contract Property Disposition Program,” along with any applicable addenda. Line 4 of this sales contract explicitly specifies the down payment amount, which should be entered as $100 for this program. Regardless of the program entered on the sales contract, the Mortgagee (lender) is responsible for determining the final eligibility of both the property and the borrower for the specific purchase program used. This contract serves as the binding agreement confirming the use of the incentive.

Yes, the $100 Down incentive is compatible with the Section 203(k) Rehabilitation Mortgage Insurance Program. This is necessary when a HUD REO property is categorized as “Uninsurable” in its current state or requires repairs exceeding $11,000. When calculating the maximum mortgage amount for a 203(k) loan under this incentive, the lender calculates the lesser of the Adjusted As-Is Value plus financeable repair costs, fees, and reserves, minus $100, or 110 percent of the After Improved Value minus $100. This allows borrowers to finance major renovations with minimal upfront capital.

For a HUD REO property that meets HUD’s Minimum Property Requirements (MPR) in its “as-is” condition without needing repairs, the transaction is processed under the standard Section 203(b) program. When utilizing the $100 Down sales incentive for these properties, the calculation for the maximum mortgage amount is straightforward. The lender takes the Adjusted Value of the property and simply subtracts $100. This calculation effectively results in a loan-to-value ratio that approaches 100 percent, significantly exceeding the standard 96.5 percent limit usually applied to FHA purchase transactions.

Yes, the $100 Down incentive can be used for properties requiring repairs, provided they meet specific criteria. If the property requires minor repairs costing no more than $10,000 to meet Minimum Property Requirements (MPR), the transaction may be processed under Section 203(b) with a Repair Escrow. In this scenario, the maximum mortgage amount is calculated by subtracting $100 from the sum of the Adjusted Value plus 110 percent of the estimated cost of repairs. The total escrow amount, including the required 10 percent contingency reserve, cannot exceed $11,000

This incentive is not available for standard real estate transactions; it is strictly limited to HUD Real Estate Owned (REO) properties. These are one- to four-unit residential properties that the U.S. Department of Housing and Urban Development (HUD) acquired following a foreclosure on an FHA-insured mortgage. Once the Secretary of HUD becomes the owner, the property is offered for sale to recover the insurance claim. The eligibility for the $100 Down incentive is specific to the property and the listing, and the option must be identified in the sales contract at the time the offer is accepted.

The “$100 Down” sales incentive is a specialized financing option offered by the Federal Housing Administration (FHA) specifically for the purchase of HUD Real Estate Owned (REO) properties. Typically, an FHA-insured mortgage requires a Minimum Required Investment (MRI) of at least 3.5 percent of the property’s Adjusted Value. However, under this specific incentive, an eligible borrower is permitted to purchase a HUD Home with a minimum down payment of only $100. This program is designed to facilitate the sale of foreclosed properties acquired by HUD to owner-occupant buyers, thereby reducing the initial cash barrier to homeownership.