Myths About Home Loan Approval
Myth: You Can’t Get Approved Without Perfect Credit
Not true. FHA loan rules say your FICO scores can start at 580 for FHA loan approval at the lowest down payment of 3.5%.
Your lender may have higher FICO score requirements for the most competitive interest rates, but where the scores themselves are concerned, you do not need perfect credit to apply.
Myth: I Need to Come Up With 100% of My Down Payment
Local down payment assistance programs can help borrowers who can’t raise the full downpayment amount. The FHA and VA do not operate such programs. You must find a local agency willing to work with you in your housing market.
Myth: I Don’t Have to Come Up With 100% of My Down Payment
Does that headline sound like a direct contradiction to the one above it? That’s because there IS a downpayment restriction in one particular case.
If you want to build a house from the ground up using a construction loan, most lenders will require you to provide 100% of your own down payment. Consider it a “good faith” requirement from the lender, showing you can truly afford the construction loan.
This is not an FHA requirement. It’s a lender standard that you may find commonplace among those issuing construction loans.
Myth: I Can Apply With a Co-Borrower Who Will Offset My Bad Credit
Here is one to beware of. You can’t get approved for an FHA loan without meeting the basic requirements for loan approval, including the FHA’s FICO score requirements and the lender’s version.
If your credit isn’t sufficient to be approved for the loan, adding another borrower won’t help. Both applicants must meet the minimum standards for the loan.
Other Myths You Should Know
Some believe FHA loans are need-based mortgages only. This is not true. Some believe you must be a first-time home buyer to use government-backed loan programs like FHA, VA, and USDA mortgages. In the case of USDA loans, this is closer to being true (there are programs specifically for first-time buyers who need USDA mortgages), but for VA and FHA loans, there is no financial need requirement.
Understand the Reasons for Private Mortgage Insurance
Carefully Read Your Closing Disclosure
Buying a Home With a Co-Borrower
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