First time home buyers come to the FHA loan process with many questions. There are some long-held misconceptions about FHA mortgages that borrowers should know long before they fill out a loan application. Let’s examine some of them.
One myth about FHA loans, and one of the most common, is that the FHA itself lends money to loan applicants. This is not true. Instead, the borrower must find a participating FHA lender, who has been certified by the FHA to issue home loans under the FHA single-family loan program.
Another misconception has to do with the nature of the FHA loan program itself, which offers affordable home loans to all qualified applicants regardless of their status as a home buyer. That means that first time home buyers and those who have purchased before are both able to apply for an FHA mortgage. There’s no prohibition against using an FHA loan for another purchase, as long as the buyer understands FHA loan occupancy requirements.
However, that also means that under the basic rules and requirements of the FHA loan program, no preferential treatment is given to first-time home buyers. FHA loan rules do not make provisions for first time buyers. But does that mean that first time buyers have NO options or special programs?
That is where the participating lender comes in. While the FHA program itself does not have a “first time home buyer” program, the lender may. You could find special rates, terms, or incentives based on your status as a first time buyer, but these would all come courtesy of the lender. All lenders are different, not all lenders have the same offerings or requirements.
Another place you may find help as a first time home buyer is with state or local agencies that offer assistance or incentives for borrowers to purchase property in their communities. Again, these would be unaffiliated with the FHA, and programs vary from place to place.
You’ll need to check with local housing agencies, government offices, or even private programs that may offer some type of help or advice to the first time purchaser.
FHA loans also do not feature a minimum income requirement. Instead, borrowers submit their financial data and the lender determines the borrower’s credit worthiness in part by examining the borrower’s debt-to-income ratio. Your income matters on the basis of how it matches up to the amount of debt you have, and whether you can afford the loan based on the lender’s debt-to-income ratio requirement.