Unsecured family loan

Thursday, July 11th, 2024 at 10:49am

Both FHA loans and Home Possible loans (but not Home Ready loans) allow a relative to provide an unsecured loan for a buyer’s down payment or closing costs. Fannie Mae disallows loans from family members unless it’s secured against collateral. Learn more: https://www.alexjaffe.com/family-lending

For a Home Possible loan, the loan term needs to be greater than 5 years but shorter than the term of the mortgage loan. We are obligated to document the terms of the loan and the source of the loan. The interest rate cannot be greater than the mortgage rate. If repayment of the loan begins after the 61st mortgage payment (more than 5 years) then we don’t need to count the monthly payment in determining how a buyer qualifies.

FHA allows an unsecured family loan provided that the total financing between the mortgage loan and family loan doesn’t exceed 100% of the property’s purchase price or appraised value. We’ll need to document the terms of the loan and the source of the loan.

Unsecured family loans are disallowed on jumbo loans and Fannie Mae loans