Top 8 Myths About FHA Loans
- FHA appraisals are difficult and often require repairs: FHA now allows private appraisers to do FHA appraisals, this solved much of the old repair problems where FHA staff appraisers would require numerous repairs to the house before allowing the loan to fund. And, with FHA, lenders are still allowed to use their own appraiser as opposed to a Conventional loan where the bank’s random choice of appraiser is used. Sellers and Realtors should find this attractive, since the new appraisal ordering system for Conventional loans has become a nightmare. Click here for more information on this issue.
- FHA loans take longer to get approved: FHA loans take the same amount of time to get underwritten as conventional loans.
- FHA loans require a lot of extra paperwork: Documentation required for FHA is the same as that required for a conventional loan.
- FHA loans cost more than conventional loans: FHA interest rates are the same as Conventional. FHA loans are often cheaper than conventional loans for 1st time borrowers and borrowers with credit issues. There is the FHA Mortgage Insurance Premium and monthly mortgage insurance to factor in, but a comparable 95% Conventional loan has similar PMI costs over the long haul.
- FHA loans have very restrictive guidelines: The opposite is true. FHA is more liberal in credit scores, debt ratios, cash reserves, etc.
- FHA Loans Are Only for First Time Home Buyers: You do NOT have to be a 1st time homebuyer to get FHA. But you can only have one FHA Loan at a time and can only get FHA on a primary residence.
- FHA Loans Require Termite Reports: If the buyer does not ask for a termite report in the contract, they do not need to get one for an FHA loan.
- FHA Loans Have Low Maximum Loan Amounts: You can get an FHA Loan all the way up to $625,500 in most of our surrounding Washington DC metro area in Washington DC proper, Northern Virginia, and Montgomery County. (updated November 8, 2016)
The bottom line is FHA is a great loan option these days, and no one, from home buyers, to sellers, to Realtor’s should have a concern about using FHA mortgage financing.