FHA Home Loan With Poor Credit Eligibility Requirements

This article will discuss and cover qualifying for an FHA home loan with poor credit. Many first-time homebuyers think they cannot get a home loan with bad credit. Every consumer has had a period in their lives where they were unemployed or lost their businesses. The period of unemployment disrupted their income flow, where they could not keep up with their monthly obligations, and their credit scores suffered. Many even had to file bankruptcy or go through a foreclosure, deed-in-lieu of foreclosure, or short sale.  In the following paragraphs, we will cover qualifying for an FHA home loan with poor credit.

What Credit Score Is Required To Qualify for FHA Home Loans With Poor Credit

The good news is homebuyers can get a home loan with bad credit. Most first-time homebuyers worry about getting a mortgage. This is because they do not think they will qualify for an FHA Home Loan With Poor Credit and low credit scores. FHA loans are the most popular loan program in the United States because of their lenient credit requirement.

Homebuyers Qualifying For FHA Home Loan With Poor Credit Scores

How bad can borrowers’ credit be to qualify for a home loan with bad credit is the question I get asked every day, especially by first-time homebuyers. Homebuyers can have prior bad credit to qualify for a home loan with bad credit. However, most mortgage lenders want to see at least a 12-month history of timely payment history.

How Do I Know I Meet The Requirements for FHA Home Loan With Poor Credit

Many first-time homebuyers are even afraid to seek a free consultation from a lender because they do not qualify for a home loan with bad credit. Even if borrowers have bad credit now and have recent late payments, I strongly recommend first-time homebuyers seek the consultation of a mortgage loan officer. The loan officer will guide borrowers to prepare themselves for a mortgage loan and see what they need to do to qualify for a mortgage loan.

Qualifying For FHA Home Loan With Poor Credit

One good thing about having poor credit is that it is like a hangover. As time passes, bad credit items have less and less of an impact on credit scores. Credit scores go up and down, and quick fixes exist to maximize and boost credit scores. It is best to seek the advice of a loan officer before borrowers start a credit repair regimen. There is no cost to consult with a loan officer. Loan officers will help borrowers fix credit to qualify for a mortgage.

HUD Guidelines on FHA Home Loan With Poor Credit

The U.S. Department of Housing and Urban Development (HUD) is the parent of the Federal Housing Administration (FHA). HUD has very lenient mortgage guidelines for borrowers. HUD’s role is to promote homeownership in the United States. As mentioned earlier, borrowers can have bad credit and qualify for a home loan with bad credit. How bad can credit be is the question? Having recent late payments in the past 12 months is another matter. Borrowers can qualify for FHA Home Loan With Poor Credit. Mortgage borrowers do not have to pay off outstanding collections and charge-off accounts to qualify for FHA loans.

Credit Scores Versus Down Payment Requirements

To qualify for a 3.5% down payment FHA-insured mortgage loan, borrowers need a minimum credit score of 580 FICO. Mortgage lenders do not want to see any late payments in the past 12 months.  One or two late payments are not a deal-breaker, but borrowers will need a good letter of explanation on why they were late. Mortgage lenders do not want to see any bank overdrafts in the past 12 months either.  Some lenders, especially banks, do not want to see any late payments after bankruptcy or foreclosure.

Re-Establishing Credit To Qualify For a Mortgage

Re-established credit after a period of bad credit is key in getting a home loan with bad credit. First-time homebuyers should have rental verification. Rental verification carries a lot of weight in the mortgage approval process. Not all FHA Lenders have the same credit and debt-to-income ratio requirements. Not all lenders have the same HUD guidelines on FHA loans for low credit scores, says Alex Carlucci, a senior loan officer at Gustan Cho Associates:

Borrowers who are told they do not qualify for an FHA Home Loan With Poor Credit find out the reason. Most lenders have lender overlays, and just because borrowers may not qualify with one lender does not mean they cannot qualify with a lender with no overlays on FHA loans.

Homebuyers who are thinking of getting pre-approved with a mortgage broker licensed in 48 states with over 160 wholesale mortgage lenders, please get in touch with us at Gustan Cho Associates at 800-900-8569. Text us for a faster response. Or email us at gcho@gustancho.com. We are available evenings, weekends, and holidays seven days a week.