Great news for borrowers everywhere! If you have a low credit score, it is now easier for you to purchase or refinance a home. Mortgage lenders have announced that they are lowering their minimum credit score requirements from 640 to 600 for FHA home loans. People that have been hit hard by the bad economy, now have the opportunity to purchase or refinance a home, even if their credit score has dropped in the last several years.
Many people throughout the country suffered financially as jobs were cut, and hours reduced. This created an entire group of people that were used to paying their bills on time and having a good credit score that were forced to pay bills late while waiting for work to pick up. This unfortunately has had devastating effects on people’s credit scores. Taking borrowers that once had a 720 credit score into the low 600s. Thankfully, there is now hope for the millions of people that want to buy a home but haven’t had the credit score to do so. Mortgage lenders lowering the FHA credit score requirements will make it possible for people throughout the country to purchase or refinance their home.
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FHA Home Loans are Excellent Options for People that Filed Bankruptcy
The FHA makes it easier to obtain a home loan after filing for bankruptcy. As long as it has been 12 months since a foreclosure, bankruptcy or short sale the FHA may approve your loan application. Some conventional lenders require seven years to pass after a bankruptcy, making the FHA an important solution.
The FHA has a lower credit score limit on their loans that most banks. They are truly a homeowners resource. Most mortgage lenders have been enforcing a minimum credit score requirement of 640, with the FHA only requires a 500 credit score for their FHA Streamline Refinance. It is important for borrowers to understand that just because the FHA sets loan criteria, doesn’t mean that a mortgage lender will be that generous. After all, the FHA doesn’t actually issue the loan. They insure the loan in order to mitigate the lenders risk. FHA loans must meet FHA loan criteria in order to qualify, but each mortgage lender may issue its own criteria above and beyond what is published by the FHA. This move to lower the minimum credit score requirement is a major step in opening the lending backup to American families.
Benefits of an FHA Home Loan
FHA home loans enable families to purchase a home for as little as 3.5% down. With low interest rates, it can be cheaper for families to buy a home than to rent one. FHA approved lenders can discuss the exact payment amount with you and help you to budget for the size of a house (purchase price) that will fit within your family’s financial goals.
Once you have an FHA home loan, you can qualify for their streamline refinance program. This loan will lower your interest rate without checking your credit score, current income, appraised value, or verifying your employment. This is the easiest refinance program around, and the main requirement is that you have an existing FHA home loan that is being paid on time.
For more information on FHA mortgages, and to see if you qualify, contact an FHA approved lender. Not every mortgage banker can offer FHA home loans so ask if they are approved before scheduling your appointment.
