Home owners with less than perfect credit may not qualify for many types of conventional loans, but FHA loans are available for exactly this type of buyer.
There are many reasons to seriously look into getting an FHA loan if you are a first time home buyer or even if you’re not. These loans are typically more affordable and easier to qualify for than conventional loans which helps make them so attractive.
FHA loans offer an affordable loan solution to borrowers who have bad credit or who have been foreclosed on in the past. However, even though FHA loans are available to a large number of people, there are still requirements that prospective home owners must be able to meet. So let’s briefly go over what you’ll need if you’re looking to get one of these loans.
You need to have a minimum credit score of 530 in order to qualify for an FHA loan. There are many ways to improve your credit score, but it’s always good to keep in mind that paying off credit card debt always helps.
If you regularly use a credit card, then keep your credit balance below 30 percent or ideally 10 percent of your overall credit limit. And of course be sure to pay your loans on time.
Borrowers with credit scores above 580 only have to pay 3.5 percent down for their home mortgage. The funds can come from a variety of sources including gifts from friends or relatives. One important thing to remember is that borrowers with a credit score below 620 may need to have a rental history of at least 12 months in order to get the loan.
If you have a credit score below 580, then your down payment will end up being much higher. Based on FHA loan requirements, borrowers with credit scores below 580 have to put down at least 10 percent of the value of their home loan. Moreover, the funds for the down payment in this instance must be the borrowers. Gifts from family members are prohibited.
Home owners looking to refinance their mortgage will likewise need to have a minimum credit score of 530. However, most lenders who work in setting up FHA loans require that the borrowers have a credit score of 640.
Accordingly, borrowers with credit scores below 640 will end up with some rather limited options when it comes time to actually take out a loan.
No matter what credit issues you have including bankruptcy or foreclosure, there are many lenders that are able to work with you so that you can get the best FHA loan possible.
With loan limits as high as 2.1 million, FHA loans should be able to accommodate the vast majority of potential home buyers. And as home prices and mortgage rates are scheduled to climb in 2013, now may be the perfect time to look further into getting an FHA loan.
