If you are in the market for a home, it may be in your best interest to finance the purchase with an FHA loan. The FHA loan comes with a low-down-payment requirement while allowing individuals with a poor credit score or history to potentially qualify for financing. Let’s take a closer look at the benefits of this loan type and how you could be approved for one.
What Is an FHA Loan?
An FHA loan is backed by the federal government and is available to anyone who is a first-time buyer. It is important to note that a first-time buyer is anyone who hasn’t owned a home in the past three years. Therefore, it may be possible to qualify even if you have bought a home previously. You can get loan approval with a down payment as low as 3.5% of the purchase price.
I Have Bad Financial History – Can I Still Qualify?
You can get an FHA loan even if your credit score or history isn’t the greatest. If you declared bankruptcy, two years must have passed and you must have re-established good credit before you are able to qualify. A lender may also approve your application despite the presence of missed payments or other blemishes on your credit report such as a foreclosure or repossession. You must typically have a credit score of at least 640 to obtain the best possible financing terms.
Lenders Can Add Their Own Requirements
It is important to mention that lenders can add their own criteria when deciding whether to accept an FHA loan application. For instance, a bank could decide that it wants a minimum down payment of 10% of the asking price if your credit score is less than 700. A credit union could decide that it wants you to have a credit score of 650 or higher if your debt-to-income ratio is too high. Ideally, you will talk to a variety of different financial institutions to find the terms that best meet your needs and budget.
An FHA loan can be a great way to buy a home when you have credit issues or lack the money needed for a large down payment. You can learn more about this type of loan by visiting the FHA website or by speaking to a lender or mortgage broker in your area.
If you are looking for your dream home, let us help you find it!