When it comes to FHA loans, there is a lot of murky water as to who qualifies and who doesn’t. Rumors have been flying around; myths that were once based in truth, but now have grown to become old wives tales that need busting. The following are a few of the most common myths in circulation regarding FHA loans. Each is busted by the truth.
1. Myth: “My credit isn’t good enough; I shouldn’t even try.”
Truth: The FHA is more interested in your payment history than your credit history. They want to ensure that you are a dependable borrower and have a steady income. Although credit history is the traditional way for companies to determine if you are dependable borrower, it is not the only way. Can you show that you are a dependable borrower? If you can and have a steady income, then you should apply.
2. Myth: “Declaring bankruptcy within the past 7 years puts me out of the running.”
Truth: How has your borrowing looked since? Have you made a consistent effort to pay your dues back on time? How long have you been doing this for? If you’ve had a clean history since then, you could very well qualify for an FHA home loan. Declaring bankruptcy doesn’t have to keep you out of the game for 7 years.
3. Myth:“It takes so much more time to process, and I need my loan as soon as possible.”
Truth:It doesn’t add any more time to your mortgage loan than it would otherwise. The process uses TOTAL Scorecard/AUS approval to help you make up any extra time spent securing the FHA insurance.
4. Myth:“But it requires so much more paperwork.”
Truth: Actually it doesn’t. It only requires one additional document you have to sign. One more signature can’t be all that bad right? Especially considering the better mortgage terms you qualify for when you cosign with the federal government’s excellent record.
5. Myth: “My bank won’t process an FHA loan. Conventional is my only option.”
Truth:Even if your bank refused to write an FHA loan, you aren’t stuck with them as your only option. If FHA is what you’re gunning for, then don’t let one lender’s disapproval stop you from getting it. There are plenty of local lenders that are competing for your business. You will most likely be able to find a lender that would take your case.
6. Myth: “I’ll have to save up enough for a large down payment.”
Truth: To the contrary, FHA loans were designed to bring down the previously impossible down payments to a more affordable rate. Most mortgages these days will ask for around 20% down. FHA will help you obtain a much lower down payment. Some loans have been known to secure 3.5% down. The only way to know for sure what you qualify for is to apply. You can be sure it’ll give you the cheapest option around, with obvious exception to applications with VA home loan lenders post-military service.
If any of these myths are keeping you from applying for an FHA loan or the FHA loan refinance program, then put them to rest and get to work on the application. Chances are that you qualify for the loan, and you’ve just been held back this entire time. Scourge these myths from your mind and move forward with confidence. It could be the last step you need to secure a home for yourself.