Myths about FHA Loans

5 Myths About FHA Loans (and the Truth Behind Them) 

FHA loans are a popular option for many homebuyers, but there are plenty of misconceptions about how they work. Whether you’re a first-time buyer or just exploring your options, it’s important to separate fact from fiction. Let’s break down five common myths about FHA loans and uncover the truth.

Myth #1: FHA Loans Are Only for First-Time Homebuyers

✅ The Truth: While FHA loans are great for first-time buyers, they are not limited to them. Anyone who meets the loan requirements can qualify, whether it’s their first or fifth home. The home must be a primary residence—you can’t use an FHA loan for an investment property.

Myth #2: You Need a 580+ Credit Score to Qualify

✅ The Truth: A 580 credit score allows you to qualify with just 3.5% down, but FHA loans accept scores as low as 500 with a 10% down payment. That makes them an option for buyers who may not qualify for conventional loans due to lower credit scores.

Myth #3: FHA Loans Come with Extremely High Interest Rates

✅ The Truth: FHA loans often have competitive interest rates, sometimes even lower than conventional loans. Rates depend on factors like credit score and market conditions, but the backing of the Federal Housing Administration helps keep FHA rates reasonable.

Myth #4: FHA Loans Take Forever to Close

✅ The Truth: The timeline for closing an FHA loan is similar to conventional loans—typically 30 to 45 days. Delays usually come from documentation issues, not the loan itself. Working with a knowledgeable lender and staying on top of paperwork can ensure a smooth closing.

Myth #5: FHA Loans Mean You’ll Pay Mortgage Insurance Forever

✅ The Truth: FHA loans require mortgage insurance (MIP), but it’s not always permanent. If you put down at least 10%, the mortgage insurance drops off after 11 years. Otherwise, you can refinance into a conventional loan later to remove it.

Feb 23, 2025