An FHA loan is one of the most popular mortgage choices among homebuyers. Buyers, who can’t qualify for other loan programs, often choose an FHA loan to fulfill their dreams of homeownership. However, despite all these, some borrowers restrict them from opting for this loan program for the myths that are associated with this loan.
Are you also finding it difficult to decide whether to opt for an FHA loan 500 credit score Texas for the myths? To help you, here, we have debunked the myths about FHA loans.
- You need an excellent credit score to get approval for this loan
Every homebuyer wants a great credit score. It is because it provides you wide choices in terms of loan availability and can also help you borrow more. However, the concept that FHA loans require a great credit score is not right. As an FHA loan is a government-backed home loan program, one can get approval with as low as a 500 credit score. Those with a low credit score may need to pay more in terms of interest, but they can qualify. So, you don’t need to worry about approval if you have a bad credit score.
- These loans are mainly designed for single-family home purchases
No, this is not true. Single-family residences are the most popular among buyers, but you can apply for an FHA loan and can get approval even if you want to buy a condo. The same is true for multifamily units. So, irrespective of your home choices, you can qualify for this loan.
- FHA loans are only for first-time buyers
Well, to understand this, first you need to know what they try to mean by first-time buyers. Generally, people think it refers to the people who have never been in the market before. But it actually means the ones who will use the loan to buy a home that they use as their primary residence. These loans are also available to those who want to refinance their current loan.
- You need to come with a 20% down to get approval
It is another myth about an FHA loan. People prefer to opt for this loan for the lenient requirement. While traditional loan needs a 20% down payment, with an FHA, one can get approval with as low as 3.5%. But as the down payment requirement varies based on the credit score, you may need to come with a slightly higher down payment than a 3.5% if your credit score is low. But then also, it will be lower than a traditional loan.
- You don’t require mortgage insurance with an FHA loan
While some home loan programs don’t need you to obtain mortgage insurance, an FHA loan does, despite what you may have been led to believe. It is structured differently in terms of payment arrangement. For instance, along with paying the premium over time in a given year generally on a monthly basis, there is also an upfront premium. It means a certain percentage of the policy is due at closing. But based on the loan agreement, the terms and conditions may differ.
So, you can understand all that you hear about an FHA loan is not true, especially when it comes to the credit score. Now, opt for an FHA-approved lender and apply for the loan today.