Federal Housing Administration (FHA) loans are among the most popular mortgage options available in today's market--especially among first-time home buyers. Specifically, a low required down payment (usually around 3.5%) is a major selling point that comes along with an FHA loan. Unfortunately, there is a lot of misinformation circulating about FHA loans. By understanding the facts behind some common FHA myths, you can make a better informed decision regarding your next home loan.
Myth 1: Only First-Time Buyers Can Use Them
While it's true that first-time home buyers tend to be the biggest market for FHA loans (due to their low down payment requirements), there is no limit to the number of FHA loans you can take out, and they are certainly not only for first-time buyers. There are many reasons to consider an FHA loan even as a repeat buyer, such as when the profits you make from the sale of your existing home aren't enough to cover a large down payment.
Myth 2: You Need Excellent Credit to Qualify
While having a good credit score always helps with qualifying for a home loan, you don't need excellent or even good credit to get approved. In fact, some FHA lenders are able to approve loan applications for people with very little credit at all. You may need more documentation and proof of income to qualify, but you certainly shouldn't assume that you can't get approved for an FHA loan with poor or no credit history.
Myth 3: FHA Interest Rates Are High
Actually, FHA loans are quite competitive when it comes to their interest rates. In reality, the aspect of FHA loans that tend to make them a little more expensive than a traditional loan is that of private mortgage insurance (PMI), which most lenders require on any loan with less than a 20% down payment. Paying PMI as part of your mortgage will cost you a bit more each month until you have enough equity to drop the insurance.
Myth 4: All FHA Loans Are the Same
This couldn't be further from the truth. With literally hundreds of different FHA lenders out there, no two loan options are exactly the same. This is why it's so important to shop around and explore your options before you sign on the dotted line. This will help to ensure that you end up with a home loan that has the most favorable terms for you.
Share3 March 2017
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