July 20, 2023
What does it take to get approved for an FHA mortgage? The answers may surprise you. Did you know there are some persistent myths about the FHA home loan program that stop some people from considering it as an option?
FHA Loan Myths You Should Know
Some believe FHA loans are need-based mortgages, believing that only those with income below a certain level can apply. This is not true.
A percentage of new borrowers sometimes believe they must be a first-time home buyer to use government-backed loan programs like FHA home loans.
When it comes to some loan programs (USDA loans) this is closer to being true, but not for FHA loans. You can find programs aimed at first-time buyers.
But in many cases this is for those who qualify for USDA mortgages. For FHA loans, there is no need-based qualification.
Ask any lender what questions they get about home loan approval, and you’ll get an earful. There are a lot of wrong assumptions about loan approval that prevent some from taking their first steps toward home ownership. Do you know what they are?
Home Loan Questions: Can I Get Approved For A Loan With Lower FICO Scores?
It depends greatly on your credit scores. FHA loan rules say your FICO scores can start at 580 for FHA loan approval. This is for the lowest down payment of 3.5%. Lower FICO scores may require a higher down payment.
Your lender will have higher FICO score requirements if you want the most competitive interest rates, but you do not need perfect credit to apply.
Home Loan Questions: Do I Need To Come Up With 100% Of My Down Payment
No, for one good reason. Local down payment assistance programs can help borrowers who can’t raise the full downpayment amount. This option may be open to those who have never owned a home before as well as for those who have not owned a home in the last three years in typical cases.
The FHA and VA do not run down payment assistance programs. You must find a local agency willing to work with you and your circumstances. But there are programs available in most states.
Home Loan Questions: Can I Use Down Payment Assistance To Build A Home?
For those who want to build a house from the ground up using an FHA construction loan, most lenders will require you to provide 100% of your own down payment.
Yes, that is different than other FHA loan options but these are lender rules and not FHA guidelines. Ask each lender you are considering about the down payment assistance option to learn what may be possible in your housing market.
Home Loan Questions: Can I Apply With A Co-Borrower?
The short answer is yes but with a caveat. You can’t get approved for an FHA loan without meeting the basic requirements for loan approval. That includes FHA’s FICO score requirements and the lender’s FICO score requirements too.
In cases where a borrower’s credit isn’t good enough to be approved for the loan, adding another borrower won’t help. Both applicants must meet the minimum standards for FHA loan approval.
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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