FHA Home Loan Facts in 2020
Are you new to the home loan journey? Here are some basics you need to know to get started.
Not All Home Loans Are the Same
You need the right loan for the right purpose. For example, if you want a low-down payment loan to help you build a house on your own land, the FHA One-Time Close construction loan is an option you should explore if you want to build and not buy.
FHA loans feature lower down payment requirements than many conventional mortgages; this is true not only for construction loans but also fixer-upper loans (the FHA 203(k) Rehabilitation Mortgage), condo loans, and even mobile home and manufactured home mortgages. There are many different kinds of home loan--be sure to start your search knowing the differences.
Cash Back to the Borrower?
FHA home loans and other government-backed mortgages do not allow cash back to the borrower at closing time except for refunds.
You are not allowed to apply for more home loan than you need to purchase and cover financed closing costs, with the intent of taking the excess in cash at closing. Your lender can explain the nuances of why this is not possible, but it’s best to expect to get a loan only for the specific amount you need to close.
Lower Interest Rates on FHA Loans
When you examine current home loan interest rates, be sure to look at the conventional loan interest rates and compare them to the FHA home loan rates. Notice a difference? In general (there have been days when exceptions apply) FHA mortgage rates are lower than conventional loans.
Borrowers who have lower FICO scores can use an FHA mortgage instead of a conventional loan, which may require higher scores to qualify for the most competitive conventional rates.
FHA Loans Are Not Need-Based--Anyone Can Apply
Any financially qualified borrower can apply for an FHA mortgage; some confuse FHA loans with USDA loans and assume that USDA income caps and need-based guidelines also apply to FHA mortgages. This is NOT true. FHA loans are not need-based loans, feature no income caps or other need requirements for you to apply. All applicants are evaluated on their ability to afford the mortgage and other financial issues.
Learn How to Meet FHA Requirements
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