May 10, 2021

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First-Time Home Buyer? FHA Loan Basics You Should Know

First time home buyer FHA loan

2020 has brought incredible low mortgage rates, surging refinance loan applications, and sustained buying and selling homes; all this in the midst of the coronavirus pandemic.

Historically low mortgage loan interest rates mean greater interest in loans and the savings current rates could provide. If you are just getting started on the road to homeownership, there are some FHA home loan basics to know as you research your mortgage options.

Different Homes, Different Loans

One myth of the home loan market is that there is a generic loan for any type of property you want to buy. That’s not true–there are different loans for different purposes.

For example, if you want a low-down-payment loan to help you build a house on your own land, the FHA One-Time Close construction loan is an option you should explore if you want to build and not buy.

The requirements for this type of loan are different than for purchasing exiting houses because the construction process requires its own type of funding.

FHA loans have low down payments; compare the FHA requirements to many conventional mortgages and you’ll find this this is true not only for construction loans but also fixer-upper loans (the FHA 203(k) Rehabilitation Mortgage), condo loans, and even mobile home and manufactured home mortgages.

Do Not Expect Cash Back At Closing Unless You Are Owed A Refund

FHA home loans and other government-backed mortgages do not allow cash back to the borrower at closing time. There is an exception for bona fide refunds of money paid up front but later financed into the mortgage.

Some apply for a home loan hoping to requires more money than needed to purchase and cover financed closing costs. The idea is to take the excess cash at closing time, but you should expect to get a home loan approved only for the specific amount you need on closing day.

Competitive Interest Rates On FHA Loans

Go online and research the most current home loan interest rates–when you do, look at the conventional loan interest rates and be sure to compare them to the FHA home loan rates.

On most days you will see a marked difference between the interest rates on government-backed mortgages and those offered on conventional loans.

FHA Loans Are For Everyone Who Qualifies

You don’t have to have a financial need or hardship to qualify for an FHA mortgage loan.

Some applicants may confuse FHA loans with the government-backed USDA loan program (which is need-based and has income limits) and assume that USDA income caps and need-based guidelines also apply to FHA mortgages. But what is the reality?

FHA loans are not need-based loans, feature no income caps or other need requirements for you to apply. All applicants are evaluated on their ability to afford the mortgage, credit scores, loan repayment history, etc.

Your home loan application for an FHA loan does not require you to be a low-income applicant or prove any sort of hardship.

Joe Wallace - Staff Writer

By Joe Wallace

July 30, 2020

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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