Basics OF FHA Home Loans For Bad Credit
FHA home loans for bad credit simply means an FHA backed loan to any individual who suffers from poor credit. The FHA or Federal Housing Authority loan program was started to help borrowers get their first home and their first home mortgage loan. The agency strictly adheres to fair lending practices. Borrowers do not need to be first time homeowners, however, FHA home loans for bad credit are only available for a primary residence - not for a second home or a rental property.
Benefits Of FHA Home Loans Bad Credit
As small a down payment as 3% (compare this to 10% minimum with PMI for 5 years on most other loan programs)
Gifted money can be applied to down payments and/ closing costs
No minimum credit score required for borrowers (meaning poor credit does not bar you from the program)
FHA Home Loan Process
Borrowers interested in FHA home loans for bad credit will need to review their credit report with an FHA loan officer to see whether they qualify. There are a number of factors that play into whether a borrower qualifies, including current job, overall monthly income, overall monthly debts, lapses in credit history, past foreclosures or bankruptcy, etc.
FHA Home Loan Requirements
The homeowner or borrower cannot have had a bankruptcy in the past two years.
The homeowner or borrower cannot have had a foreclosure in the past three years.
Healthy Alternative To Subprime Or Hard Money
Compared with subprime or bad credit loans, FHA home loans for bad credit are a preferable option. First, they require much less money down. Second, they carry lower interest rates and terms. Lastly, the loans are backed by the federal government, not a private lender who may be more interested in acquiring the property than seeing that the homeowner keeps their home, makes their monthly payments and can create good equity in their primary residence.