If you have ever dreamt of holding the keys to your very first home, you have likely heard of the FHA loan. It is one of the most popular paths to homeownership in California, especially for those who might not have a massive pile of cash saved up or a perfect credit score. But here is the thing: while FHA loans are accessible, they are not always simple.
At Maya Team Inc., we see hundreds of families every year who are ready to buy, but they often trip over the same few hurdles. Whether you are looking at a cozy condo in Long Beach or a family home in San Bernardino, making a mistake on your FHA application can cost you time, money, or even the house itself.
I am Yaxkin Rony Velasquez, your Real Estate and Mortgage Broker, Realtor®, and Mortgage Loan Originator (MLO). Along with Mona Bottros, our Realtor® and Office Manager, we want to make sure you walk into your home-buying journey with your eyes wide open.
Here are the seven most common mistakes people make with FHA loans, and exactly how you can avoid them.
What is an FHA Loan?
Before we dive into the mistakes, let’s get the basics down. An FHA loan is a mortgage that is insured by the Federal Housing Administration. Because the government backs the loan, lenders like us can offer better terms to people who might not qualify for a "conventional" loan.
The big draws? You can put down as little as three point five percent of the purchase price, and the credit requirements are much more flexible. But "flexible" doesn't mean "anything goes."
1. Searching for Homes Before Getting Pre-Approved
This is the number one mistake we see. You see a beautiful house online, you fall in love with the kitchen, and you spend your Saturday touring it, only to find out later that the monthly payment is one thousand dollars more than you can afford.
The Fix:
Stop scrolling through Zillow for a moment and get a full FHA pre-approval. This is different from a "pre-qualification," which is just a quick guess. A pre-approval means we have actually looked at your taxes, your pay stubs, and your bank statements. It tells you exactly what you can afford so you don’t end up heartbroken.
2. Underestimating the Credit Score Requirements
We often hear people say, "Oh, FHA takes anyone with bad credit." That is a dangerous assumption. While it is true that FHA is more forgiving than other programs, there are still strict limits.
In twenty-twenty-six, the general rules are:
- To qualify for the three point five percent down payment, you usually need a credit score of at least five hundred eighty.
- If your score is between five hundred and five hundred seventy-nine, you can still qualify, but you will likely need to put down ten percent.
The Fix:
Pull your credit report at least six months before you want to buy. If your score is at five hundred sixty, we can work with you on a plan to bump it up to that five hundred eighty mark. This one small move could save you six point five percent on your down payment! Check out our resources at Maya Team Inc. for credit improvement tips.
3. Forgetting About the Upfront Mortgage Insurance Premium (UFMIP)
FHA loans have two types of mortgage insurance. Most people remember the monthly one, but they forget the Upfront Mortgage Insurance Premium. This is a fee of one point seven five percent of the total loan amount.
For example, if you are buying a home for five hundred thousand dollars, that upfront fee is eight thousand seven hundred fifty dollars.
The Fix:
The good news is that you don’t usually have to pay this out of pocket; most buyers "roll" it into the loan. However, you need to account for this in your monthly payment calculation because it increases your total loan balance. Always ask your MLO to show you the "total loan amount" including this fee.
4. Mishandling "Gift Funds"
FHA is wonderful because it allows family members to give you the money for your down payment. This is called a "gift fund." But you can't just take a suitcase of cash from your uncle and deposit it into your bank account. If the lender sees a sudden deposit of ten thousand dollars with no paper trail, your loan will be flagged.
The Fix:
Every gift must have a "Gift Letter" signed by the donor, and we need to see the "paper trail" showing the money leaving their account and entering yours. Never deposit large amounts of cash into your bank account during the loan process without talking to us first.
5. Ignoring FHA Appraisal Standards
Unlike a conventional appraisal, an FHA appraisal is also a safety inspection. The appraiser isn't just looking at the value of the home; they are looking for "safety, soundness, and habitability."
Common deal-killers include:
- Peeling paint (in homes built before nineteen-seventy-eight).
- Missing handrails on stairs.
- Exposed wiring.
- A roof that has less than two years of life left.
The Fix:
Work with an experienced Realtor® like Mona Bottros. She knows how to spot these "FHA red flags" during the first walkthrough. If we find these issues, we can ask the seller to fix them before the appraiser even arrives.
6. Taking on New Debt Before Closing
You’ve found the house, the appraisal is done, and you’re two weeks away from closing. You decide to buy a new refrigerator and a sofa on credit to celebrate. Stop!
Buying a car, opening a new credit card, or even co-signing a loan for a friend can change your Debt-to-Income (DTI) ratio. If your DTI goes over the limit (usually around forty-three percent to fifty percent for FHA), the bank will deny your loan at the very last minute.
The Fix:
Freeze your credit! Don't buy anything major until the keys are in your hand. If you absolutely must make a big purchase, call Rony first to see how it will affect your file.
7. Not Checking Local Loan Limits
FHA loans have "ceilings" on how much you can borrow, and these change every year and vary by county. For example, the limit in Los Angeles County is much higher than in a rural area. If you try to buy a home for one million two hundred thousand dollars with an FHA loan in an area where the limit is only six hundred thousand dollars, you are going to run into a wall.
The Fix:
In twenty-twenty-six, loan limits have been adjusted. Before you start shopping, ask us for the specific FHA loan limit for the county you are interested in. This ensures you are looking at homes that actually fit the FHA criteria.
Your FHA Checklist: How to Fix These Mistakes Today
If you're feeling a bit overwhelmed, don't worry. Here is a simple checklist to get you back on track:
- Get Pre-Approved: Contact us at 562-762-9634 to start your official FHA review.
- Verify Your Credit: Aim for a score of at least five hundred eighty to save on your down payment.
- Document Everything: Keep every bank statement and pay stub. If you get a gift, get the letter ready.
- Inspect Early: Have Mona Bottros check for safety issues before you fall in love with a "fixer-upper" that doesn't meet FHA standards.
- Stay Fiscally Quiet: No new cars, no new furniture, and no job changes until after you close.
Let's Get You Home
Buying a home is one of the biggest financial moves you will ever make. It is exciting, but it can also be stressful if you don't have the right team in your corner. At Maya Team Inc., we specialize in helping first-time buyers navigate these exact hurdles.
Whether you need a Mortgage Loan Originator to crunch the numbers or a Realtor® to find the perfect house, Rony and Mona are here to help.
Do you have questions about your specific credit score or a home you found? Write a comment below and let’s talk about it!
If you're ready to see how much you qualify for, reach out to us today. We would love to be part of your journey.
Contact Us:
- Mobile: 562-762-9634
- Email: mayateaminc@gmail.com
- Website: https://nas.io/mayateaminc
