Don’t count out an FHA offer without knowing the full picture.An FHA loan does NOT automatically mean a buyer has bad credit or no money in the bank!
Here’s the truth: Right now, FHA loans often have the lowest interest rates. Even well-qualified buyers with solid credit and plenty of funds may choose FHA simply because the rate is better. In many cases, FHA rates can be in the low 6% range, while conventional rates might be in the mid 6 or 7% — and that lower rate can help a buyer qualify for more home.
Myth #1: FHA is only for buyers with little money down.
Reality: Conventional loans offer as low as 3% down, which is less than FHA’s 3.5%.
Myth #2: FHA borrowers have low credit scores.
Reality: Yes, FHA allows scores as low as 580, but many FHA buyers have scores well into the 700s. Sometimes they choose FHA because it allows a higher DTI (debt-to-income ratio), making it easier to qualify — especially for buyers with student loans or other obligations.
Some buyers will use the difference in down payment requirements (3.5% FHA vs. 5% conventional) to buy down their interest rate, which can make their monthly payment lower with FHA, even after adding mortgage insurance.
Key difference:
• FHA max DTI: 56.9%
• Conventional max DTI: 50%
That means some buyers can qualify for more home with FHA.
Most buyers care about their monthly payment, not whether they have mortgage insurance for the life of the loan.
Conventional loans are great — and if they’re the best fit, we use them! But many times, FHA simply makes more sense for the buyer’s situation.
Agents: If you’re presenting offers, please know the facts so you can educate sellers. If a seller says “no FHA buyers,” ask why — and if it’s because they think FHA buyers are weak, kindly correct them.
Valid reasons to decline FHA:
• FHA 90-day flip rule
• Property condition won’t meet FHA standards and seller can’t or won’t make repairs
Bottom Education is key — the more we know, the more we grow!
