Correcting Misinformation About FHA Loans
February 6, 2024
If you are new to home loans and have been researching FHA mortgages, you may run across some bad information about the FHA home loan program and how it is run. We examine some important truths and bad information found online during recent research in this article.
Entry-Level FHA Loan Myths
A basic prevailing myth about FHA mortgages is that they are only for financially disadvantaged borrowers or first-time homebuyers.
Neither of these things are true. FHA mortgages are for any financially qualified borrower, no matter if they have owned a home before or not. FHA loans are not need-based, and you need to meet no income restrictions or caps to qualify.
Next-Level FHA Loan Myths
One mortgage lender website we found in our research (who shall remain nameless) published the following information about FHA mortgages on its official site:
“Here are some FHA home loan disadvantages:
As mentioned in the list above, there is an “extra cost” of the upfront mortgage insurance premium. Still, borrowers should know that conventional mortgages also typically require private mortgage insurance unless you pay 20% down.
You may pay more in the form of the FHA upfront premium, but don’t assume that conventional loans do not require mortgage insurance; FHA loans do. That is not true.
The second point in the list described as an FHA loan disadvantage is the idea that the FHA sets home price maximums. But that list does not mention that FHA jumbo loans are also an option for those who want to buy a house that costs more than the FHA loan limit for that area.
The third bullet point in the list above mentions that FHA loans have higher interest rates than conventional loans. This is 100% not true in typical cases.
The Reality About FHA Loan Interest Rates
Dan Green of The Mortgage Reports notes, “Mortgage rates typically look lower for FHA loans than conventional loans on paper.”
Green also points out that your actual interest rate for an FHA mortgage will be offered based on your financial qualifications, and for some borrowers, the rate offered will be higher. But that does NOT mean FHA loan interest rates are higher across the board.
Always use multiple sources for fact-checking when researching your home loan options. Mistakes and bad information are lurking even on finance-oriented websites, and you’ll want to verify (with multiple sources) any facts you aren’t clear on in your research.
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RELATED VIDEOS:
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
Entry-Level FHA Loan Myths
A basic prevailing myth about FHA mortgages is that they are only for financially disadvantaged borrowers or first-time homebuyers.
Neither of these things are true. FHA mortgages are for any financially qualified borrower, no matter if they have owned a home before or not. FHA loans are not need-based, and you need to meet no income restrictions or caps to qualify.
Next-Level FHA Loan Myths
One mortgage lender website we found in our research (who shall remain nameless) published the following information about FHA mortgages on its official site:
“Here are some FHA home loan disadvantages:
- An extra cost – an upfront mortgage insurance premium (MIP) of 2.25% of the loan’s value. The MIP must either be paid in cash when you get the loan or rolled into the life of the loan.
- Home price qualifying maximums are set by FHA.
- Interest rates are higher than with conventional loans (based on relaxed borrower eligibility requirements).”
As mentioned in the list above, there is an “extra cost” of the upfront mortgage insurance premium. Still, borrowers should know that conventional mortgages also typically require private mortgage insurance unless you pay 20% down.
You may pay more in the form of the FHA upfront premium, but don’t assume that conventional loans do not require mortgage insurance; FHA loans do. That is not true.
The second point in the list described as an FHA loan disadvantage is the idea that the FHA sets home price maximums. But that list does not mention that FHA jumbo loans are also an option for those who want to buy a house that costs more than the FHA loan limit for that area.
The third bullet point in the list above mentions that FHA loans have higher interest rates than conventional loans. This is 100% not true in typical cases.
The Reality About FHA Loan Interest Rates
Dan Green of The Mortgage Reports notes, “Mortgage rates typically look lower for FHA loans than conventional loans on paper.”
Green also points out that your actual interest rate for an FHA mortgage will be offered based on your financial qualifications, and for some borrowers, the rate offered will be higher. But that does NOT mean FHA loan interest rates are higher across the board.
Always use multiple sources for fact-checking when researching your home loan options. Mistakes and bad information are lurking even on finance-oriented websites, and you’ll want to verify (with multiple sources) any facts you aren’t clear on in your research.
------------------------------
RELATED VIDEOS:
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
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