For those who despair of ever getting approved for a home loan, a government agency has you in its sights. The Federal Housing Administration (FHA) offers consumers a loan guarantee program that can help people with less than perfect credit to experience home ownership regardless of past problems. Read on to find out more about the specific requirements for gaining loan approval using the FHA.
A bankruptcy can cause untold problems with acquiring new credit, including a home loan
Many people have watched in horror as their financial situations deteriorated little by little, and some have had no choice but to declare a chapter 7 bankruptcy. While getting a home loan might be possible after the bankruptcy has cleared your credit report, the FHA has less-stringent rules. The most important elements of being accepted into the FHA program are that you are at least two years from your final bankruptcy discharge and that you have rehabilitated your credit since the filing. Almost all lenders are looking for the same thing as the FHA: bills paid on time, new credit accounts opened judiciously and low balances on those accounts.
Conventional loans require a good credit score
It's no secret that many lenders want to do business with applicants that have scores in the 750 range. If you have been struggling to raise your score by attending to your credit issues and still cannot attain that number, take heart. The FHA may be able to approve you at a score as low as 580. The 580 score comes with a need to put at least 3.5% down on the home. Even those with a score of only 500 can qualify as long as they are prepared to place 10% as a down payment.
A foreclosure in your past might derail a conventional loan
You may have already been a homeowner in the past and the experience did not end well. In many instances, it would be extremely difficult to get a loan approved when you've had a past foreclosure. The FHA loan program doesn't hold your previous poor financial issues against you, however, providing you with a second chance at homeownership. You can be approved for an FHA loan if you are at least three years past the foreclosure. Just as with the other issues above, you must show that you have cleaned up your credit report. You should have no bad marks like late credit card payments, medical collections or too much credit utilization.
Speak to your real estate agent and get started on locating your new home. Realize your dream by qualifying for an FHA loan today.