Homebuyers, FHA is back in vogue. Back in the bubble years, FHA financing was the red-headed stepchild of the mortgage world because borrowers could get better interest rates and terms using conventional financing. But as underwriting standards have tightened, FHA is more Christina Applegate and less Marla Hooch.
Because it’s been so long since we’ve paid attention to FHA, I’d like to clear up some myths and misconceptions concerning the program. One myth: that FHA is for first-time buyers only. Yes, a lot of first-time buyers are utilizing the program because the down-payment requirement is just 3.5%, but everyone is welcome to join in the party.
Another misconception is that FHA is only for buyers with questionable credit. It’s true that your FICO score can dip a little lower with FHA, but again, no one is excluded for having a great credit score. Seriously, how silly would that be?
Some folks also think you have to go through some sort of homebuyer educational program to qualify. Again, not true. Any idiot can apply for FHA financing.
FHA financing being more expensive than conventional financing is another (sometimes) myth. At high loan-to-value ratios, conventional financing can be more expensive due to the rising costs of conventional mortgage insurance, says Jim Semeyn, a loan officer for Bank of America. At lower LTVs, conventional may be the way to go if you have more than 3.5% for the down payment, but check out both options before committing to any one loan program.
I’m sure there are many other FHA myths floating around out there. For more information about FHA financing, go to http://www.hud.gov/buying/loans.cfm. And if you still have questions after visiting the site, any good loan officer should be happy to get you some answers.
Tiny Varner is a licensed Realtor in Virginia, Maryland, and the District of Columbia. She loves her job.
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