When you start researching FHA loans you'll learn a lot about getting an FHA mortgage and the process of applying. But even with all the information you can find on the Internet, there's plenty of confusion to clear up about FHA loans.
News, updates, and explanations to keep you informed.
Ten Myths About FHA Loans
When you start researching FHA loans you'll learn a lot about getting an FHA mortgage and the process of applying. But even with all the information you can find on the Internet, there's plenty of confusion to clear up about FHA loans. Let's examine the facts of FHA loans and dismiss the fictions.
Myth #1: My bank won't process FHA home loans. I should just get a conventional loan.
There are plenty of reputable lenders approved and willing to work with you on an FHA guaranteed home loan. It's true that some lenders refuse to write FHA loans; if your current lender won't help, keep looking. You'll find plenty of professionals who want to get you started on the road to an FHA mortgage.
Myth #2: I can use "stated income" on my FHA loan application just like on conventional loans.
You are required to show proof of income when applying for an FHA home loan. You'll need documentation like last year's income tax return forms or pay stubs. Stated income is not enough to get approved for an FHA mortgage.
Myth #3: Without good credit, I won't qualify for an FHA home loan.
The FHA is able to process your loan application even if you have no credit score. Your payment history is more important than a limited credit history or a few bad marks on your credit record. Can you show that you are a dependable borrower? Do you have a steady income? If the answer to those two questions is yes, chances are you can qualify for an FHA loan.
Myth #4: I declared bankruptcy. I won't be able to get a home loan for seven years.
If you have made on-time payments and have established good patterns of on time payments since your bankruptcy filing, you may qualify for an FHA loan. Let your loan officer determine what needs to be done to get you approved. If you are currently delinquent on your repayment agreement, you may not be approved for an FHA loan, but those who are current should not be afraid to apply.
Myth #5: I need to save for a big down payment.
It's true that some conventional loans require as much as 20% down. Fortunately, FHA loans require much less. You may be able to pay as little as 3.5% down plus closing costs.
Myth #6: I only need a 3% down payment on my home with an FHA loan.
This information is found on some lending websites, but it's out of date. In 2009, the official down payment rate changed to 3.5%. The FHA down payment rate is still much lower than conventional loans, but that extra .5% is an important figure to budget for.
Myth #7: I can use the money paid for closing costs to help meet that 3.5% down payment.
In 2009, closing costs are due separately from your down payment.
Myth #8: The FHA home loan down payment is only calculated at 3.5% of the selling price of the home.
FHA home loan down payments are calculated at 3.5% of the selling price of the home, but may also be calculated according to the home's appraised value. The lower figure of the two determines the down payment.
Myth #9: I can buy any property with an FHA loan.
FHA home mortgages are approved only for those who will live in the building they buy. Commercial buildings or property you won't use as your primary residence don't qualify.
Myth #10: I can't purchase a condominium with an FHA loan.
This is not true--if you plan on living in the condo as your main residence, you can get an FHA-insured loan to purchase this kind of property. You can also purchase multi-family homes--the residency rule still applies.
These are just a few of the most popular myths associated with FHA mortgages. FHA Refinancing has many different rules than those for first time home buyers. Always know the specific terms of your contract and your obligations before you sign.
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