If you’re looking for an FHA loan, you might wonder if there are any myths surrounding these loans that you should know about.

While there are misconceptions about FHA loans in Utah, the fact is that they can be an excellent option for those who may not otherwise qualify for a traditional mortgage.

Here are some of the myths about FHA loans and the truth behind them:

Only First-Time Home Purchasers Are Eligible For FHA Loans

There is no restriction for individuals who now own or have previously owned property. The negligible down payment needed is the main factor luring first-timers to this scheme. 

3.5% down is all that is required for FHA loans. Additionally, and maybe even more significantly, first-time applicants can benefit from the generous non-owner-occupied income allowance. 

As a result, a parent may be listed on the loan application, and the borrowers are not required to contribute anything less than $500 as a minimum.

For some incentives that can be utilized to assist with the down payment and closing costs, the buyers may be needed to be first-time homebuyers, but there is no such restriction for FHA loans.

Even so, someone who hasn’t purchased a property in the prior three years is considered a first-time buyer.

FHA Valuations Have Strict Requirements 

It’s not uncommon for a seller to find out that an offer to purchase includes a borrower utilizing FHA financing. However, we’re not entirely clear where this information came from. 

The appraiser must complete a checklist known as the Minimum Property Requirements for VA loans, another government-guaranteed program, but there are no additional appraisal requirements for FHA loans. 

The majority of other mortgage programs impose the exact requirements as FHA loans. For instance, a water heater that is proven to be faulty has to be replaced. 

To be considered habitable, the home must have the fundamental amenities that every residence needs, such as running water, a functional HVAC system, and a solid foundation.

FHA Loans May Only Be Used To Fund Single-Family Houses

The condominium project must have FHA approval for a condo purchase to be granted. However, once the project is approved, all subsequent condo purchases may utilize an FHA. 

Even the original developer or project manager can obtain an FHA loan approval since individual lenders have the authority to do so. However, this misconception is only partially true—an FHA loan cannot be used without permission.

FHA Loans Are Exclusively Available To Those With Poor Credit

It’s untrue. FHA loans are a little more lenient regarding credit and credit scores, but those with less-than-perfect credit are not eligible for the program. 

FHA loans are not a mortgage product specifically for folks with somewhat damaged credit, but they have some very competitive interest rates compared to other programs.

The truth is that lenders set the minimum credit score requirements, not the FHA. The minimal credit scores that lenders want are also up to them. Although many employers require at least a 580, a famous minimum score is 620. 

Suppose the extenuating circumstances that caused the damaged credit were beyond the borrower’s control, and the possibility of the event occurring are essentially zero. In that case, consideration may also be granted to people with even worse credit ratings

FHA Requirements Are Universal 

It’s untrue. While it is true that lenders must abide by specific rules to qualify for the FHA loan guarantee, lenders can also add additional conditions, known as overlays, that can lower their degree of risk. 

Thus, a loan with a 600-credit score may be approved by one lender but denied by another. If one lender rejects a loan, another one could be able to. For those loans, conventional lenders may also use overlays.


These are the biggest myths about FHA loans or mortgage loans in Utah that can prevent you from getting approval. However, by understanding these myths and using them to your advantage, you can increase your chances of getting approved.

Mortgage brokers at Luneta Home Loans serve your interests, not the banks’. Whether you’re a first-time buyer or refinancing your current house, our objective is to get you into your ideal home as soon as possible. Contact us to learn more about FHA loans in Utah.