FHA Loans: True or False?
April 19, 2024
We write about many details of FHA home loans, and if you are on the path to homeownership for the first time, it helps to know some of the facts and fiction surrounding these home loans before you start looking for a home, a lender, or applying for pre-qualification.
Some borrowers assume the FHA loan program is wrong for them because they “earn too much,” which is not true. Others assume they cannot qualify for an FHA loan because they have less-than-perfect credit, which is also not true, depending on the circumstances.
True or False? You Can Buy Any Residence With An FHA Mortgage
False. FHA home loans are not available for investment properties, including single-family homes with more than one living unit.
The borrower who purchases a one-to-four-unit property with an FHA loan must live in at least one of the units as their home address. The other units may be rented out, but not in absentia.
FHA home loans are not offered for properties located too close to oil wells, high-pressure gas pipelines, or other hazards, and they are also not provided for homes in certain coastal flood areas.
True or False? FHA Home Loans Can Be Used to Buy Second Homes
The answer depends on the circumstances. Typically, you cannot be approved for more than one FHA loan, but changes in career, family size, or other issues may require the borrower to apply for an exception to the policy, which is permitted if the borrower meets certain requirements.
You cannot use an FHA mortgage to buy a vacation home or any house you don’t plan to use as a primary residence. You can ask the lender to consider a loan to buy a larger house for your family as it expands, or to live within a reasonable commuting distance from work.
True or False? FHA Loans Don’t Let You Cancel Mortgage Insurance
Many conventional loans allow the borrower to opt out of private mortgage insurance by requiring a 20% down payment at closing.
FHA loans have mortgage insurance that runs the full duration unless you pay 10% down at closing time and meet FHA requirements to cancel the mortgage insurance after 11 years.
True or False? FHA Loan Options Include a Home Equity Loan
Technically true, in the form of the FHA cash-out refinance loan option. However, if you seek a home equity line of credit or HELOC, you may need to explore other options.
The FHA single-family home loan program does not offer a HELOC option, which allows borrowers to have a line of credit against the equity in the home.
If you are still determining how these issues may affect your home loan, talk to a participating FHA lender about your concerns. You’ll be glad you did.
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RELATED VIDEOS:
Don't Skip the Home Inspection
Bigger is Better With a Jumbo Loan
Insuring Mortgages With the FHA Funding Fee
Some borrowers assume the FHA loan program is wrong for them because they “earn too much,” which is not true. Others assume they cannot qualify for an FHA loan because they have less-than-perfect credit, which is also not true, depending on the circumstances.
True or False? You Can Buy Any Residence With An FHA Mortgage
False. FHA home loans are not available for investment properties, including single-family homes with more than one living unit.
The borrower who purchases a one-to-four-unit property with an FHA loan must live in at least one of the units as their home address. The other units may be rented out, but not in absentia.
FHA home loans are not offered for properties located too close to oil wells, high-pressure gas pipelines, or other hazards, and they are also not provided for homes in certain coastal flood areas.
True or False? FHA Home Loans Can Be Used to Buy Second Homes
The answer depends on the circumstances. Typically, you cannot be approved for more than one FHA loan, but changes in career, family size, or other issues may require the borrower to apply for an exception to the policy, which is permitted if the borrower meets certain requirements.
You cannot use an FHA mortgage to buy a vacation home or any house you don’t plan to use as a primary residence. You can ask the lender to consider a loan to buy a larger house for your family as it expands, or to live within a reasonable commuting distance from work.
True or False? FHA Loans Don’t Let You Cancel Mortgage Insurance
Many conventional loans allow the borrower to opt out of private mortgage insurance by requiring a 20% down payment at closing.
FHA loans have mortgage insurance that runs the full duration unless you pay 10% down at closing time and meet FHA requirements to cancel the mortgage insurance after 11 years.
True or False? FHA Loan Options Include a Home Equity Loan
Technically true, in the form of the FHA cash-out refinance loan option. However, if you seek a home equity line of credit or HELOC, you may need to explore other options.
The FHA single-family home loan program does not offer a HELOC option, which allows borrowers to have a line of credit against the equity in the home.
If you are still determining how these issues may affect your home loan, talk to a participating FHA lender about your concerns. You’ll be glad you did.
------------------------------
RELATED VIDEOS:
Don't Skip the Home Inspection
Bigger is Better With a Jumbo Loan
Insuring Mortgages With the FHA Funding Fee
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