May 30, 2015
FHA loan myths are hard to dispel–no matter how many times you try to set the record straight, there will always be people who simply don’t know the truth about FHA loans and how they can help the typical house hunter.
For example, some people mistakenly believe that FHA loans are only for the economically disadvantaged. Others believe something similar along these lines–that it is possible to “earn too much” to qualify for an FHA mortgage. These things are not true.
Another myth about FHA home loans is that a borrower’s eligibility is solely dependent on what the FHA loan rules say about FICO scores, credit history, etc. But this is also not the reality behind the FHA home loan process. For example, FHA mortgages do have a minimum FICO credit score requirement, but many lenders place their own FICO score minimums higher than the FHA.
Does that mean the lender is doing something wrong?
Not at all–the FHA loan rulebook establishes minimum standards, but the lender is free to require higher minimums.
Another misconception about FHA home loans is that a borrower might have access to a zero-downpayment home loan. That may be true of a similar program for veterans (the VA home loan program) but FHA loans do require a minimum 3.5% minimum downpayment, which must come from approved sources.
Your closing costs, appraisal fees, and other costs cannot be considered a part of your downpayment–this expense is entirely separate from those costs. Speak to your lender to find out how your closing costs and down payment requirements work for that financial institution.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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