It's the American dream; owning a home of your very own. For many, it is just that; a dream. Financial difficulties can wreak havoc with your credit and saving up enough for a down payment can be downright impossible. You should know, however, that there is a way to get financing for your dream home. The Federal Housing Administration (FHA) provides government-backed mortgage loans for those who may have given up hope. Read on to learn more about this answer to home financing for those who need it most.
Credit scores can seem like a cruel joke to those who have had issues with the use of credit, but the FHA approval process allows those with scores of at least 580 to qualify for a loan. That score requires a down payment of at least 3.5% down, which is far lower than the conventional loan down payment requirements. If you have a credit score that is lower than 580, the FHA still has a solution for you: for potential buyers with a credit score of at least 500, you can still qualify for a loan if you can also come up with a down payment of at least 10% down.
Bankruptcy filings can go hand-in-hand for those with unfortunate financial issues and many conventional lenders are reluctant to lend to those filers, but just having a bankruptcy in your past is not a stop sign for qualifying for an FHA loan. As long as you are at least 2 years past your bankruptcy final order, you may be able to qualify for a loan. The time period is not the only consideration, however; you must also show that you have progressed from that bankruptcy and are now making wiser choices when it comes to the use of credit. Most bankruptcy filers are able to eventually procure more credit, and the FHA lender will be taking a close look at your credit report to evaluate issues like:
- How much of available credit you are using (credit utilization).
- How many credit inquiries you have on your record.
- How often you have been late on payments.
- The presence of any collection activity or charge offs since your bankruptcy.
Foreclosures may be a red flag to most conventional lenders, which is perfectly understandable. Having a foreclosure in your past is no bar to an FHA approval, however. It must have been at least 3 years since your last foreclosure and you must show that you have learned from your previous mistakes, just like with the bankruptcy in your past.
Speak to a real estate agent and get pointed to an FHA lender for your dream home today.