As mandated by the Housing and Economic Recovery Act of 2008 (HERA), as of October 1, the ""Federal Housing Administration"":http://www.fha.gov (FHA) stopped accepting seller-funded down payments.
The ""National Association of Realtors"":http://www.realtor.org (NAR) recently issued a report warning about programs being created to get around this new requirement. Some are being set up as earned-income programs where a buyer asks a seller to enroll in a ""property alliance"" for a fee, NAR explained. An administrative cost is paid to the program, and the fee goes to the buyer as a commission that can, in theory, be considered earned income.
Although the ""Department of Housing and Urban Development"":http://www.hud.gov (HUD) does recognize earned income, such programs are not considered legitimate means for meeting the new down payment requirements for FHA-insured mortgages, NAR said.