FHA Loan Questions: True or False?
July 2, 2024
What do new homebuyers need to know about FHA home loans, and how they can help? We examine some facts and fiction below. If you have never purchased a home, the information below can help you get off to a better start.
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True or false?
An FHA mortgage is for economically disadvantaged borrowers and first-time homebuyers.
FALSE.
FHA home loans are for any financially qualified borrower. There are no income restrictions or requirements that the applicant is a first-time buyer. USDA mortgages are the ones people typically confuse with FHA loans. USDA home loans feature income restrictions and have need-based approval guidelines.
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True or false?
FHA loans are for suburban homes and mobile homes only.
FALSE.
FHA loans are available for condos, duplexes, and fixer-uppers. You can also build a home from the ground up using an FHA One-Time Close construction loan.
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True or false?
FHA loans have lower credit qualifying requirements.
TRUE.
FHA loans require a minimum FICO score of 580 or higher for the lowest downpayment. Some get confused because there are also lender standards for the loans, which may have higher FICO score requirements than the FHA minimum.
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True or false?
FHA loans for mobile homes, manufactured homes, and construction require you to have your own land first.
FALSE.
You can purchase land with any FHA loan used to buy a mobile home or build a house as long as you financially qualify.
You cannot purchase undeveloped land with an FHA mortgage with no plans to develop it, but if you want to buy and build or install it at the same time, an FHA mortgage option may be available.
------------------------------
True or false?
You can only buy a home with a single-living unit with an FHA mortgage.
FALSE.
FHA loans allow single families to purchase property with as many as four living units. FHA loan limits are higher for multi-unit property. The only caveat is that at least one borrower obligated on the FHA loan must occupy the home as their primary residence or main address.
------------------------------
True or False?
FHA loans have refinance loans that can help tap into home equity.
TRUE.
After you have purchased the property and made payments for a minimum time, you may qualify for an FHA cash-out refinance loan designed to help the borrower take equity out of the home in cash.
For these loans to be approved, you must have reached a minimum loan-to-value ratio, and your lender will require a new credit check and appraisal.
There are no home equity lines of credit options with an FHA mortgage, but the cash-out refinance option is one to consider if you need to renovate, pay off non-revolving debt, or have other cash needs.
------------------------------
RELATED VIDEOS:
You're Almost There When You Get Your Loan Approval
Learn About the Mortgage Insurance Premium (MIP)
Pre-approval Starts the Mortgage Process
------------------------------
True or false?
An FHA mortgage is for economically disadvantaged borrowers and first-time homebuyers.
FALSE.
FHA home loans are for any financially qualified borrower. There are no income restrictions or requirements that the applicant is a first-time buyer. USDA mortgages are the ones people typically confuse with FHA loans. USDA home loans feature income restrictions and have need-based approval guidelines.
------------------------------
True or false?
FHA loans are for suburban homes and mobile homes only.
FALSE.
FHA loans are available for condos, duplexes, and fixer-uppers. You can also build a home from the ground up using an FHA One-Time Close construction loan.
------------------------------
True or false?
FHA loans have lower credit qualifying requirements.
TRUE.
FHA loans require a minimum FICO score of 580 or higher for the lowest downpayment. Some get confused because there are also lender standards for the loans, which may have higher FICO score requirements than the FHA minimum.
------------------------------
True or false?
FHA loans for mobile homes, manufactured homes, and construction require you to have your own land first.
FALSE.
You can purchase land with any FHA loan used to buy a mobile home or build a house as long as you financially qualify.
You cannot purchase undeveloped land with an FHA mortgage with no plans to develop it, but if you want to buy and build or install it at the same time, an FHA mortgage option may be available.
------------------------------
True or false?
You can only buy a home with a single-living unit with an FHA mortgage.
FALSE.
FHA loans allow single families to purchase property with as many as four living units. FHA loan limits are higher for multi-unit property. The only caveat is that at least one borrower obligated on the FHA loan must occupy the home as their primary residence or main address.
------------------------------
True or False?
FHA loans have refinance loans that can help tap into home equity.
TRUE.
After you have purchased the property and made payments for a minimum time, you may qualify for an FHA cash-out refinance loan designed to help the borrower take equity out of the home in cash.
For these loans to be approved, you must have reached a minimum loan-to-value ratio, and your lender will require a new credit check and appraisal.
There are no home equity lines of credit options with an FHA mortgage, but the cash-out refinance option is one to consider if you need to renovate, pay off non-revolving debt, or have other cash needs.
------------------------------
RELATED VIDEOS:
You're Almost There When You Get Your Loan Approval
Learn About the Mortgage Insurance Premium (MIP)
Pre-approval Starts the Mortgage Process
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