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Poor Credit Borrowers May Still Qualify for an FHA Mortgage Loan

By Michele Lerner
Mortgage Credit Problems Columnist


Prospective home buyers with poor credit may think they need to go to bad credit mortgage lenders, but under some circumstances, even borrowers with bad credit can qualify for FHA home loans.

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The fastest way to find out if you qualify for an FHA loan is to enter your information on this page.

While borrowers with good credit have myriad options available for financing a home purchase or refinancing a mortgage, borrowers with credit problems may need to make a larger down payment or demonstrate their ability to repay the FHA mortgage in another way.

FHA Loans and Credit Problems

  • No History: If you lack a credit history, FHA lenders may allow substitute forms of credit history such as utility bills or a letter from a landlord.
  • Bankruptcy: depending on the type of filing and how long ago it was filed, an FHA loan may still be available. However, the borrowers must have stable employment, qualify financially, and have no subsequent bad credit.
  • Late payments: FHA loan requirements look at the overall pattern of credit use. If you are consistently late paying your bills, this could disqualify you from an FHA loan. However, if you paid bills late for a short time while unemployed or in poor health, you may still be able to qualify for an FHA mortgage.
  • Foreclosure: FHA loan requirements usually require a waiting period of at least three years after a foreclosure, but sometimes an exception can be made for extenuating circumstances like illness.
  • Collections and Judgments: FHA mortgage guidelines do not require minor collections to be paid, but judgments must be paid in full before qualifying.
  • Federal Debts: Borrowers delinquent on federal debt such as taxes and student loans are not eligible for an FHA loan unless they are on an approved payment plan.

If you have bad credit or extensive debt, you may still be able to qualify for an FHA loan, but you may have to make a down payment of 10% instead of the minimal 3.5% down payment required for most FHA home loans.

Before applying for an FHA mortgage, pay all your bills on time and try to reduce your debt and increase your income. These steps can improve your chances of qualifying for an FHA loan.

Find out if you qualify now for an FHA mortgage by entering your information on this page. The best way to get started fixing your credit problems and obtaining approval for an FHA loan is to find out where you stand.

Sources

http://www.fha.com

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