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Even thou FHA loans have become hugely popular in the last 2yrs, I still hear myths about them that are just not true.  Here are the 6 most popular myths I hear and the truth:

1.      “FHA loans are for folks with bad credit”- This is not true.  I do many FHA loans where the client has a 680 score or even higher.  There are many benefits to a FHA loan vs a conventional, low down payment, looser underwriting guidelines and many times the FHA rate is even lower.  Compared to a Conventional loan.

2.      “FHA inspects the Property, making it a harder loan”- FHA does not send out an inspector to the property.  They do require a FHA appraisal.  But, honestly the FHA appraisal is really no different than a Conventional appraisal.  And any problem with a home would be stated on a conventional appraisal also, not just on a FHA appraisal.

3.      “The seller can only pay 3%, in closing costs”- The seller is actually allowed to pay up to 6% of the buyers closing costs and escrows(taxes and insurance).  This is another benefit over a conventional loan, which can limit the seller to paying 3%. 

4.      “FHA does not have a min Fico Score, so you can get a FHA loan with a 530!”- this comment is true and false.  HUD(fha) does not require a minimum credit score, but HUD is not lending you money.  A bank or mortgage lender is and they all require a minimum score. 

5.      “FHA loans, take longer to close”- This is not true.  You can close a FHA loan just as fast as a conventional loan. 

6.      “The max sales price is $271k when using a FHA loan”- in the part of Texas I lend, I have heard this often in the past.  This is not true, the max loan amount is $271k.  Not the sales price.  So someone could buy a $300k home with 10% down payment and still get approved for a FHA loan. 

Whether you are buying a home or refinancing, a FHA loan can be the best option for you.  Not to mention, there really aren’t many negatives to FHA loans.