By Michele Lerner
Mortgage Credit Problems Columnist

While the FHA mortgage program is meant to help borrowers who might not qualify for a conventional loan, even this program has credit guidelines which applicants have to meet. All lenders, even those offering FHA loans, want to be certain the borrower can afford to make the monthly payments on the loan and will be responsible. Enter your information on this page to get quotes from lenders for the lowest FHA loan rates.

Before you apply for an FHA loan, review your finances and determine if you are truly ready to become a homeowner. FHA loan limits, which vary by area, allow you to qualify for an FHA mortgage only up to the maximum amount for your area, so be sure to check the limits before you begin looking for a home.

If you have poor credit but have been working to improve your credit report, you may be ready to apply.

FHA loan requirements, while less rigorous than conventional lending standards, depend on borrowers being able to prove that they have job stability and consistent income. Here are some tips to help you qualify for an FHA loan:

1. Make sure you have at least one year (preferably two years) of payment reliability. Even if your credit score is still low, a bad credit mortgage lender will look for an improving pattern of on-time payments.
2. FHA-insured loans usually require a credit score of at least 580, otherwise borrowers must make a down payment of at least 10%. Some lenders require a credit score of 620 or 640 in order to approve an FHA loan. If your credit score is below 650, shop for a lender that won't impose a higher minimum score.
3. The fastest way to improve your credit score is to pay everything on time and to pay down your debt. Do not close any credit card accounts, though, because this reduces your available credit and can lower your score.
4. Do not make any major credit purchase before you apply for an FHA mortgage because this will impact your debt-to-income ratio.

If you are still struggling with the burden of too much credit card debt, you may need to wait six months to one year before applying for an FHA loan in order to improve your chances of qualifying. If you are not sure you qualify, enter your information on this page to receive quotes from several lenders.

Sources

http://www.fha.com

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• FHA refinancing and underwater homeowners