FHA Loan Qualifications: It May Be You They Are Looking For!
If you are currently considering about buying a house or home refinance but your credit score is less than perfect, or if you are either wants to buy a home but haven’t established traditional credit or currently have an ARM loan that is due to reset but have tattered credit, do not worry. There is the federal government’s FHA Loan that has simpler qualifications to meet (rather than conventional loan), so you and your less-than-perfect credit score may be the cure for your troubled heart.
FHA loan qualifications has long been said to be one of the most lenient qualification in the mortgage jungle because they do not only use FICO scores to assess your profile. There are many Americans with low FICO scores that qualify for FHA loans, and it may be you that they are looking for -and keen to help-!
If they do not use my FICO score, then what do they use to assess my risk of borrowing?
You may have heard that the FHA does not use FICO score exclusively to choose whether you qualify for an FHA Loan or not. Well, the FHA makes its choice based on your total credit profile. For instance, if you got laid off, got sick, or divorced, your credit score may take a dip even though you have been a excellent borrower previously. FHA Loan Lenders will look at your bill paying history over the last 24months to determine if you qualify or not.
Why the FHA loan may be the best option for you who have terrible credit score? The FHA loan is a excellent option for those who don’t really have a credit profile, and for those who are responsible about their money until something came up and stained their FICO score because of the FHA loans’ lenient qualification.
FHA loan qualification is excellent to those who are not truly high-risk people. The FHA looks at overall credit profile, not just the latest FICO score one has. FHA has a philosophy that most of the borrowers overcome these financial setbacks. Your FICO score may indicate sub-prime status, but the FHA will assess your income, recent payback status with current lenders as well you current debt-to-income ratio to see whether you really are one of the high risk people or you really have a chance to buy or refinance your dream home.
FHA loan qualification is also excellent to those who have no established credit. Say, you have never used a credit card. You don’t have a car loan, student loan, or any mortgage -four things that are considered traditional means of credit and are recorded with the 3 major credit bureaus.
If you are one of those anti-credit people (until you read this article, of course), the FHA will consider nontraditional credit references such as rent, utility bills, cell phone, personal loan, even regular deposits into saving accounts, as a proof of credit worthiness, in order to see if you have a responsible money management.
So, if you have terrible credit score or never have anything to do with credit (so you can’t show really much about your credit) the FHA loan may be the answer. Hardworking and responsible families who have tattered credit score have felt the benefit of the lenient FHA loan qualifications, either it be an attempt to buy a house or refinance. Having read all this, what’s to wait then? Go to the HUD website to search the nearest FHA home loan lender in your neighborhood. Pleased hunting!
Read also: FHA Financing and FHA Loan Requirements
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