Are you tired of renting but don’t think you would qualify for a home loan? You are not alone. Maybe you find it challenging to come up with a 20% down payment. Perhaps you have had a foreclosure or bankruptcy and think you will never qualify for another loan unless you wait several years. There are many myths out there that we can debunk with the help of certain loan programs that are available today.
In this article, we will focus specifically on Michigan FHA loans and how they can make your dream of home ownership become a reality.
4 Myths That May Be Keeping You From Homeownership
Myth #1 – I Need a 20% Down Payment
Although a 20% down payment will help decrease your monthly payment, it is NOT required to finance a home. A Michigan FHA loan will only require a 3.5% down payment. In fact, even conventional loans don’t require a 20% down payment. They require 5% for repeat buyers and 3% for first time buyers.
Myth #2 – My Credit Isn’t Good Enough to Buy a Home
Many people think that they need a perfect credit score to even be considered for a home loan. However there are a few programs that will be more lenient on credit scores than a conventional mortgage. One of these loan programs is the Michigan FHA loan. An FHA loan requires a minimum credit score of 580. Since FHA loans are insured by the federal government, this allows lenders to assume less risk and be more forgiving with credit scores.
Myth #3 – I Can’t Qualify Because I had a Bankruptcy or Foreclosure
False! You can apply for a Michigan FHA loan 2 years after your bankruptcy has been discharged or 3 years after the date of your foreclosure. Although there still is a waiting period, this is significantly less than the waiting period for conventional loans. This also debunks the common myth that borrowers need to wait 7-10 years after a bankruptcy or foreclosure.
Myth #4 – I Have Too Many Student Loans/Other Debt
Don’t let debt discourage you from applying for a home loan. The main thing is to maintain a favorable DTI (debt to income ratio).
A Michigan FHA loan allows you to use 31% of your income towards housing costs and 43% towards housing expenses and long-term debt. These ratios often times can be higher if you’re a stronger borrower. If you find that that certain debt such as student loans are keeping you from your desired DTI, you may have the option of extending the loan period and decreasing your monthly payment on the debt. However, this will depend on your specific situation to determine if that option is beneficial for you long term.
Ready to Apply For a Michigan FHA Loan?
Now that we have debunked 4 major home loan myths, is there anything else holding you back from owning a home? If you would like to consult with a Michigan FHA loan expert or if you are ready to begin the application process, contact Julie Krumholz from Main Street Bank today. With over 30 years in the mortgage industry, Julie can answer any questions you may have and communicate complex FHA loan terms in simple, clear language.
Learn More About FHA Loans: Michigan FHA Loan Limits, Eligibility and Other Common Questions