FHA Facts From Fiction on FHA Loans
This guide covers FHA facts from fiction on FHA loans. Many homebuyers often get confused when shopping for a mortgage. What are the FHA facts versus BS? Sharp consumers normally shop with vendors before deciding which company to buy goods and services from. FHA loans are popular for homebuyers, especially those with lower credit scores or smaller down payments. However, there can be some confusion and misinformation regarding FHA loans. In the following paragraphs, we will separate FHA facts from fiction.
Are FHA Loans Only For First-Time Homebuyers?
A frequently asked question is, are FHA loans for first-time homebuyers only? While FHA loans are popular among first-time buyers, they are not exclusive to them. Whether you’re a first-time buyer or not, you can qualify for an FHA loan. Therefore, the answer to the frequently asked question, Are FHA loans only for first-time homebuyers, is NO. FHA loans are for every type of homebuyer: first-time and seasoned homebuyers and homeowners.
Are You a First Time Home Buyer? Call Us.
Is It True FHA Loans are Only For Low-Income Borrowers
It is a fact that FHA loans are not income-restricted. However, they do have loan limits that vary by location. Your income will influence the loan amount you qualify for. However, FHA loans are available to borrowers with various income levels.
FHA Facts From Fiction: Do FHA Loans Require a Perfect Credit Score?
Homebuyers may get conflicting answers to the frequently asked question, are FHA loans for low-down payments only? It is a fact, not fiction, that FHA loans are more lenient with credit score requirements compared to some conventional loans. You can generally qualify for an FHA loan with credit scores as low as 500, but a higher score may result in better terms. Lenders may have credit score requirements, so shopping around is essential.
FHA Facts From Fiction: FHA Loans are Only For Low Down Payments
FHA facts from fiction: FHA loans are known for their low down payment requirement, typically 3.5% of the purchase price. However, you can make a more substantial down payment if you choose to do so. A larger down payment on an FHA loan can lower the mortgage insurance premiums.
Do FHA Loans Have High Closing Costs
Fact: Closing costs can vary depending on your location and the lender you choose, but FHA loans do not inherently have higher closing costs than other types of loans. It’s essential to compare closing costs from different lenders to find the best deal.
FHA Facts Versus Fiction: FHA Loans Are For Single-Family Homes Only?
Fact: FHA loans can be used to purchase various property types, including single-family homes, multi-unit properties (up to four units), condominiums, and manufactured homes (with certain requirements).
FHA Facts Versus Fiction: Are FHA More Expensive Than Conventional Loans
Fact: FHA loans may have higher upfront and ongoing mortgage insurance costs than conventional loans, especially if you make a low down payment. However, the total cost of an FHA loan can be competitive, depending on your specific financial situation and the prevailing interest rates.
FHA Facts From Fiction: Are FHA Loans Hard To Qualify
Another frequently asked question about FHA loans is: Are FHA loans more difficult to qualify for and get approved for than other government or conventional loan programs? While FHA loans have specific requirements, they are often more accessible for borrowers with lower credit scores or smaller down payments than other loan types.
Many lenders are experienced in working with FHA loans and can help guide you through the process. In conclusion, FHA loans can be a viable option for many borrowers.
It’s essential to separate FHA facts from fiction and consult a knowledgeable mortgage professional to determine if an FHA loan is the right choice for your unique financial situation and homeownership goals. Countless home buyers get conflicting information from lenders when shopping for a mortgage.
Want to Learn More About FHA Facts from Fiction on FHA Loans? Talk to Us.
FAQs on FHA Facts From Fiction
Here are some of the questions we get from mortgage shoppers.
- Why do lenders have different credit score requirements?
- Why are the debt-to-income ratios different from lender to lender?
- Why do some lenders require collections to be paid off while others don’t?
- Why do some lenders require charge-off accounts to be paid while others don’t?
- What do some lenders allow manual underwriting and others don’t?
- Why do some lenders allow borrowers in a Chapter 13 Bankruptcy repayment plan to apply for FHA Loans and others don’t?
- Why do some lenders require a one to two-year waiting period after a Chapter 13 Bankruptcy discharge date, and other lenders have no waiting period after a Chapter 13 Bankruptcy discharge?
This blog will discuss FHA FACTS and why lenders have different FHA requirements. We will explain FHA FACTS versus FHA Overlays by lenders.
FHA Facts From Fiction on Lender Overlays
There are two different types of mortgage guidelines regarding FHA Loans: HUD Agency Guidelines and lender overlays Imposed by Individual mortgage lenders. HUD is the federal agency and parent of the Federal Housing Administration, often referred to as FHA.
HUD agency guidelines are the minimum agency mortgage guidelines on FHA loans set by the Department of Housing Development (HUD).
HUD is the parent of FHA and sets the minimum lending requirements for FHA loans. Borrowers who meet the minimum HUD Guidelines can qualify for an FHA loan. HUD Agency Guidelines are FHA FACTS required in qualifying for a 3.5% down payment FHA loan.
What are Lender Overlays on FHA Loans
Mortgage companies can have additional lending requirements above and beyond HUD Agency Guidelines called lender overlays. Most mortgage companies have lender overlays that surpass FHA Guidelines. Due to these lender overlays, borrowers get conflicting FHA requirements on FHA loans. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on FHA loans. We go off HUD agency guidelines and have ZERO lender overlays.
Qualifying For FHA Loans
Below are FHA FACTS from FICTION. If you go to a lender and hear other than the FHA FACTS below, it has its mortgage overlays. Seek another lender that has no lender overlays. The minimum credit score to qualify for a 3.5% down payment FHA Loan is 580 FICO. Borrowers can qualify for FHA Loans with credit scores under 580 FICO down to 500 FICO but need a 10% down payment. Any lender that asks for a higher credit score has credit score overlays.
The maximum debt-to-income ratio to get an approve/eligible per automated underwriting system (AUS) is 46.9% front end and 56.9% back end.
Any lenders that have lower debt-to-income ratio requirements are due to their lender overlays and not HUD Agency Guidelines. Outstanding collections and charged-off accounts do not have to be paid off to qualify for FHA Loans. Homebuyers can purchase condos and manufactured homes with FHA loans. However, the condo must be HUD-approved, and the manufactured home must meet HUD Guidelines. One to four units qualify for FHA loans as long as they are residential.
Best Lenders For FHA Loans With No Overlays
Non-occupant co-borrowers are allowed but must be related to the main borrower by law, blood, and marriage. Non-occupant co-borrowers who are not family members can be added to the main borrower’s loan but need a 25% down payment. There is a 2-year waiting period after the Chapter 7 Bankruptcy discharge date. There is a 3-year waiting period after foreclosure, deed-in-lieu of foreclosure, and short sale.
Borrowers in a Chapter 13 Bankruptcy repayment plan can qualify for FHA Loans one year into the repayment plan with Trustee Approval. There is no waiting period after the Chapter 13 Bankruptcy discharge date.
Any bankruptcy with less than 24 months seasoning after the discharge date needs to be manually underwritten. For more information on this or other mortgage-related topics, don’t hesitate to get in touch with us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available evenings, weekends, and holidays seven days a week.
