FHA Mortgage Qualification Myths Debunked
Unauthentic information on the web has created a lot of confusion in the air, making people reluctant to choose FHA mortgages. Conventional loans do not differ much from the FHA loans but there still are some thin margins giving life to FHA Mortgage qualification myths.
The Stated Income
Myth: People believe that they can use the Stated Income approach to complete their FHA loan applications. Stated Income loans are different than FHA loans and do not require that a borrower provide a lender with documents that prove income.
For FHA loan applications, you need to provide a verification document along with the income statement. More often than not, last year’s tax payment proof is submitted as the verification document.
Good Credit Score
Myth: I need to collect a large sum of money and hold a good credit score to qualify for an FHA loan. In fact, many bad credit applicants are able to consider great options using our free quote tool.
For an FHA mortgage, your billing history is more important than holding a good credit record. Even with low credit or no credit at all, you can apply and process your FHA loan if you have a good billing and payment history. If you are a dependable borrower or you have a steady income, chances are that your FHA home loan will be approved.
Qualification With Bankruptcy
Myth: I was declared bankrupt and I cannot apply for loan now.
Bankrupt applicants need to talk to a legal consultant. Generally, there are two conditions for bankrupt applicants. First, if they are currently repaying according to the agreement, then they might not be approved for the loan but they must not be afraid to apply. Secondly, if they have repaid punctually, then they may apply and get approved for FHA loan. Taking steps to qualify for a bad credit loan will be appropriate and there may be some options that help you succeed.
Myth: Like other conventional loans, I need to pay large sum of money as down payment.
Fortunately, FHA loans start with very low down payments. This is part of why these appeal to many home buyers. Previously, only 3% of the total payment was required; now you only have to pay 3.5% as down payment, while conventional loans charge up to 20%.
Myth: I can buy any type of property with an FHA loan.
Only those properties qualify for FHA loan, which you plan to live in. Properties, which are not your prime residencies, do not qualify for being funded with an FHA loan. However, you may buy a multi-home building, but the same condition applies for it as well. An FHA mortgage is not going to be your top choice when purchasing investment properties or second homes.
Myth: Certain mortgage costs and fees are not applicable to the borrower.
Any party interested in a mortgage is required to pay all the customary charges as FHA has eliminated the non-applicable fee schedule for closing costs.
Self-Employed and Small Business Owners
Myth: FHA purchase loans are not for self-employed individuals.
To an extent, it is true but certain conditions apply here as well. If it is a small startup, then the FHA loan application might be rejected. Self-employed individuals can show good payment, billing and credit history to get their loan application approved. However, small business owners should seek a real estate and/or legal consultant’s advice to get their application approved.
FHA loans process much faster than conventional loans. Any applicant can be eligible for a FHA loan under specified conditions. The tip is to use authentic information and check your eligibility before filing.