Are you about to opt for a bad credit FHA loan? Then, you should know these key things.
The Federal Housing Administration has insured FHA loans in 1934, but the FHA guidelines have changed a bit. At that time, the minimum credit requirement for an FHA loan was 640, however, nowadays; one can get approval for an FHA loan with as low as a 500 credit score. And this is where comes the concept of bad credit FHA loans.
A bad credit FHA loan will help you to qualify for a mortgage with low credit scores and no minimum income requirement. Do you want to know more about FHA government home loans bad credit in Texas? Here are some of the crucial things that you should know –
- Benefits of bad credit FHA loan
If your credit score is not up-to-the-mark and it is difficult for you to opt for other home loan programs, you can easily opt for FHA loans. There are diverse benefits of getting an FHA loan if you have bad credit, such as low income permitted, high debt-to-income ratios allowed, low credit scores down to a 500 FICO, gift funds allowed for the down payment, non-occupying co-borrowers can also cosign to help you qualify for the loan. With a 10% down payment, your annual mortgage insurance will be lower. When most lenders will be reluctant to work with you, the FHA-approved lenders will help you.
- Bad credit FHA loans guaranteed approval
When you are able to meet certain requirements properly, your FHA mortgage approval is virtually guaranteed.
- Your meet the credit score and down payment requirements
- You have been employed with consistent documented income for the past two years
- Your income is sufficient to qualify for the loan amount you are seeking
- You have not had a bankruptcy in the past two years or foreclosure over the past 3 years
- The home is zoned residential, will be your primary residence, and is in livable condition
If you could meet all these requirements above, then your bad credit FHA home loan approval will be easy and hassle-free for you.
- Bad credit FHA refinance
If you have had bad credit, you can either opt for a traditional FHA refinance and an FHA streamlines refinance. With an FHA streamline refinance, the process is even easier as they require less paperwork. In case your credit score worsened after you were approved for your original FHA loan, your recent bad credit history will not be an issue unless you have been missing payments.
When you have a low credit score, opting for an FHA loan will be the right choice for you. But you should keep this in mind that the FHA loan requirements vary from lenders to lenders. So, you should ask for quotes from different lenders, compare these, and then decide who to opt for. Making wise decisions will make your home buying process easy and effective.