The bank can not and most likely will not pay your down payment. You have to source the funds. FHA down payment funds must come from a verifiable source, such as the borrowers' bank account. Unacceptable sources for funds include credit cards, personal loans or cash on-hand that has no paper trail. Acceptable sources include stocks, mutual funds and retirement accounts. FHA requires at least two months' seasoning on down payment funds, i.e., a borrower must supply the most recent account statements.
You could certainly ask for the REO bank to pay closing costs, and if it is fannie, freddie or HUD, they usually allow 3.5% in closing costs. So they would pay attorneys fees, and benk fees, prepaids, taxes etc, saving you from having to take that money out of pocket at closing, so then you should have the 3.5% for the FHA down payment, not having those closing costs to pay for.
If you would like a referral for a mortgage broker(s) you can talk to, and if you are not working with another agent under contract, feel free to call me at (860)316-2569 or email firstname.lastname@example.org with any other questions. Take care, and have a good night!
Best of Luck!
you have asked some very good questions, let me try to address them. let's start with the bank owned house. Depending on which bank it is, there may be financing with rehab available from the lender, their terms can vary depending on the lender and the program. The more conventional FHA 203K rehab loan does require a 3.5% down payment. Sometimes, though, the banks will pay your closing costs. There are first time buyer programs in CT that allow for 100% financing, but this is not rehab money. Would have to be on a property that is in good condition. The best way to get started, as you said you were new to this, is to enlist the assistance of an experienced and knowledgeable agent. don't be afraid to ask for qualifications, sales history and if they are willing to help you research the various options. A good agent can help you find lending programs that fit your needs.
If you're getting an FHA loan, the seller/bank cannot pay your down payment. It must come from you, or be a gift or other eligible source of funds. Your loan officer can provide you with the options.
Best of luck,