Are you tired of renting an apartment but are still reluctant to try getting a mortgage loan for a house? You’re probably worried about the stringent requirements for a mortgage application!
There’s no reason to be afraid of applying for a home loan, especially an FHA loan. To appease your doubts, here are some myths about FHA home loans and the truth behind them.
Myth #1: FHA loans require a sterling credit score to be approved
It’s actually the exact opposite. Compared to other loan programs, an FHA loan will require you to have a credit score of at least 580 to get approved. That’s a significantly lower score than what other loan programs require!
Of course, like any other loan program, FHA loans have their own set of requirements—but it’s relatively easy to get approved because of the low credit score requirement. In fact, if your credit score falls below 580, there’s still a chance to get approved, but you’ll need to pay a 10% down payment.
Myth #2: Self-employed people are not eligible for FHA loans
Nearly 30% of the country’s workforce are self-employed individuals. Does that money that those 44 million people can’t apply for an FHA loan? That’s just not true at all!
While loan approval for self-employed individuals is a bit tougher than those employed by a company, that reality is not unique to FHA loans. Many lenders have more stringent requirements and a different set of documentation for self-employed borrowers in order to corroborate their financial ability.
FHA loans are not, by any means, closed off to self-employed borrowers. It’s a more complicated process that requires a lot more effort and documentation to get approved, just like any other loan program.
Myth #3: You can’t get an FHA loan if you have a student loan or other debts
Don’t let debt discourage you from applying for a home loan. As long as you can maintain a favorable debt to income ratio (DTI), then you can have an FHA loan approved.
If you’re one of the thousands of first-time homebuyers who are still paying off your student loans, you have the option of extending the loan period and decreasing your monthly payment on the debt. That way, you can maintain a good DTI and have your loan approved! However, this will depend on your particular situation. You need to determine you can still keep up with your payments in the long term!
Myth #4: You need to pay a 20% down payment to be approved
A 20% down payment on your FHA loan will definitely help decrease your monthly payment. However, it is not required to finance a house. The minimum down payment needed for an FHA loan to be approved is only 3.5%.
Whatever down payment you decide to pay, it’s really up to you and your ability to pay off your loan in the long term. If you have the money on hand, then go for a 20% down payment so your subsequent payments won’t be too much of a burden.
Conclusion
FHA loans still remain one of the most viable and worthwhile loan options available today. They’re especially beneficial to first-time homebuyers who are still learning the ropes about real estate financing! However, if you’re still not convinced, then work with a highly skilled loan specialist to find you the right loan for your financial needs.
If you’re looking for a mortgage broker with better rates and superior customer service, YOUnited Lending is the one to call. We work with multiple lenders on your behalf to get you the best mortgage rates and quick closings. Submit your loan application today!
