People hear a lot of things and misread them. This misunderstanding creates misconceptions and myths that spread like a wildfire. In home-buying cases, people refrain from seeking FHA loans due to certain myths and misconceptions. Let us find out these myths and debunked them one at a time.
Common myths and misconceptions regarding FHA finance and home loans
- FHA loans are for those who are buying a house for the first time
This is a myth that has spread like a fire in the wind. It is absolutely not true as the Utah FHA refinance is meant for everyone. Yes! It obviously has some elegant features for the new homebuyers but the same can be availed by anyone interested. The prime reason for the first-timers crowding is its very low down payment as low as 3.5% that anyone can afford these days. The prime reason for seeking such a low down payment is to save money for the future. You can easily own a home, pay the interest, and still continue saving money. For owning a house, you will not have to pay a hefty sum liquidating your hard-earned savings. FHA loans can be availed by anyone.
- FHA loans have down payments similar to that of conventional loans
It is absolutely not true. As mentioned earlier, the minimum down payment for FHA loans is 3.5% and it is not similar to that of the conventional loan programs people opt for. Most of the conventional loans have a down payment of 5%. This can be easily solved by the assistance of Utah housing down payment assistance programs. In this case, FHA borrowers can use gift funds and grants from local or state government assistance programs.
- FHA loans for bad credit people
This is also not true. People with poor credit scores can use it as a home loan. In fact, anyone, irrespective of his credit score, can avail of the benefits of an FHA loan. The interest rates offered by the FHA loans are very competitive. When compared to the other loan fixtures, FHA is the ideal one to seek. It is not designed for the first time home buyer programs Utah but for everyone with any credit score.
The fact that debunks this myth is that FHA does not set a criterion for an eligible credit score. This is only done by the lenders. They can set it as high as they want. People with a damaged credit condition can also apply and get a loan from the authority. In fact, the reason for damaged credit is also considered by the authorities. If the circumstances were extenuating, the person becomes eligible for an FHA housing loan.
- Stricter FHA appraisals make sellers repair
This is also a myth that needs to be eradicated. FHA loans do not come with any appraisal program where the seller has to repair his/her real estate property before handing it over. If the borrower is using the benefits of FHA finance, the rule dictates no such appraisal requirement to fulfill. Most of the other mortgage programs demand a strict appraisal. For instance, an inspection program known as the Minimum Property Requirements is done for VA loans. There is no such protocol mentioned or carried in FHA housing loans. For the Utah housing first time home buyer program, the seller will not have to comply with such requirements. The FHA loans will require a few things such as the restoration of the basic features. For example, if the asset has a faulty HVAC system, it needs to be repaired by the owner before the borrower sets his foot in.
- It takes a very long time to process an FHA loan for approval
It is true that the FHA housing loans are a government initiative but the myth that it takes too much time to get approved is an absolute myth. It is not a mortgage program that has many guidelines to be followed. The process is quite simple and with the participation from both sides, it can be approved quickly. In order to receive a guarantee from the government, lenders must follow a set of rules. If the lender follows the protocols in the right way but the loan gets defaulted, 25% of the entire amount is compensated. FHA does not get involved in anything unless the loan enters the default zone. Approving FHA loans takes almost the same time the other type of loan approval seeks.
- FHA loans are for single-family homes, not for condos
Purchasing a condo with FHA loans will require approval from the authority. Unless the project is approved by the FHA, a loan cannot be used to purchase it. The myth is partly right in this case. If the project is approved, condo purchases can be done using FHA housing loan facilities. In fact, the project manager or the original developer can also seek a loan approval from FHA. Hence, it is not limited to single-family homes. FHA home loans can be used to buy condominiums only when the project is approved.
- FHA has universalized a set of guidelines that lenders have to stick to
FHA has provided a set of guidelines for the lenders to follow so that the projects become eligible for borrowing. The projects with FHA guarantee can also come with an additional set of guidelines or internal requirements overlaid by the lenders. These overlays are presented along with the FHA guidelines to reduce the risks taken by lenders. This means that if a lender is not willing to disburse the loan amount to a person with a 600-credit score, another will.
FHA loans have immense flexibility designed by the government for the people. Seeking a proper solution might need the assistance of a mortgage service provider. A professional mortgage consultant will be able to show you the right path and debunk the myths of FHA finance and housing loans. Whether you are a first-time buyer or investing in another property, check the facts without believing these myths about FHA loans.