| For low-income and bad credit borrowers, the FHA's | | | | least 12 months, where the borrower has made all his |
| mortgage loan program can sound like a dream come | | | | payments on time. Instead of looking at just your credit |
| true. Many borrowers have heard that the FHA won't | | | | report, the FHA may also look at your phone bills, rent |
| look at your credit, needs less money down, and | | | | history, utilities, among other bills to demonstrate your |
| approves applicants that other banks won't. What are | | | | credit worthiness. |
| the facts and what are the myths? Read on to find | | | | You also get the chance to demonstrate why you |
| out. | | | | may have a bad credit score. For example, if you |
| Fact or Myth #1 - The Government Loans Money | | | | have an outstanding history of making on-time |
| The first common myth of FHA loans is that the US | | | | payments up until a medical emergency, and since |
| government's Federal Assistance Mortgage (FHA) | | | | then still managed to pay your consumer debts, you |
| program actually loans out money. This isn't the case. | | | | may still qualify for an FHA loan. |
| An FHA loan is simply a bank/credit union loan that is | | | | Fact or Myth #3 - An FHA Loan is a Better Deal |
| backed by a guarantee from the government. If you | | | | While it's true that an FHA loan entails less risk for |
| fail to pay the mortgage, the government guarantees | | | | banking institutions and therefore they can charge less, |
| that they will repay the bank instead. | | | | an FHA loan may not always be a better deal. |
| Because of this guarantee, the bank's lending | | | | The FHA is designed to be a self-sustaining institution, |
| requirements are much looser, because they're taking | | | | and therefore has to make money as well, in the form |
| less risk. | | | | of insurance paid to the FHA. |
| Fact or Myth #2 - Your Credit Doesn't Matter | | | | For low income or bad credit borrowers, FHA backed |
| This is a half myth, half truth. While the FHA won't | | | | loans are almost always the better deal. For medium |
| base your loan on your FICO score, your credit history | | | | income or average credit, research and comparison is |
| is still important. | | | | necessary to be sure whether FHA is for you or not. |
| What the FHA is looking for is a solid history of at | | | | |