What is an FHA loan? FHA loans are types of mortgages from private lenders that are regulated and insured by Federal Housing Administration (FHA). These loans are great options for many buyers, especially in the shifting market where interest rates are climbing, and inflation is creating a strain on homebuyer’s budgets. Unfortunately, many people fear FHA loans because they are misunderstood. This negative reputation has created prevailing myths that make many homebuyers shy away from pursuing this loan type, which has many flexible options that open more avenues for potential buyers, especially those with a lower credit score, smaller or no down payment, a previous bankruptcy, and are first-time home buyer friendly.
So, let’s put to bed the some of the top FHA myths that maybe keeping homebuyers (and you) from pursuing this option:
This is quite the contrary! FHA loans are less restrictive which allow for many people to qualify somewhat easier than with a traditional mortgage.
This is untrue. Well FHA has certain guidelines and requirements that lenders must follow to be eligible, lenders can also add their own internal requirements. That means that one lender might not qualify you, but another might be able to help.
Wrong! FHA-approved lenders usually offer loans with as little as 3.5% down and borrowers can use gift funds for down payments, as well as grants from state and federal assistance programs.
Nope. FHA loans can be used to purchase single family homes, 1–4-unit homes, condos, modular homes, and even manufactured homes (depending on lender and qualifications).
Not exactly. Well, a property must meet FHA minimum requirements and fair market housing value, the process isn’t different than any other mortgage. In fact, most appraisers do both FHA and conventional appraisals. The most cited reason that makes both buyers and sellers afraid of FHA loans is the roof! A roof only needs to have a remaining physical life of at least two years.
To learn more about FHA loans and different options available, call our office! We can help you navigate this shifting housing market and where to start to find that next home—whether it be your first time, investment property, or retirement home.
Written by Cherie Denslow-Brannan