Bad credit fha mortgage
If you are suffering from bad credit and looking for a mortgage loan then the best option for you is the FHA mortgage loan.The FHA mortgage can help you get the best and the lowest possible fixed rates for your mortgage and has helped a number of first-time borrowers in getting a mortgage and buying the house of their choice.
FHA is the Federal Housing Administration which a federal department aiming at helping people fulfilling their needs in buying a house. A bad credit cannot stop from having a house of your own When you opt for an FHA mortgage loan since FHA insures your mortgage the lenders do not have a problem in giving out these loans even to people with credit problems.The lender relax their criteria and broaden it so as to accommodate even people with bad credit.
FHA approves you of the mortgage loan even if you have faced bankruptcy or any other type of credit problem Moreover qualifying for these loans is simpler as compared to the conventional loans that are available at higher interest rates and terms.
Features of the bad credit FHA mortgages
When you apply for a bad credit FHA mortgage you are supposed to pay a down payment of 3% of the value of the purchase and it becomes pretty easy to arrange this amount.You can either borrow from a family member or borrow from your savings. Besides you can also take it from your employer or from a charitable organization. Usually such options are not available with conventional loans.
You should keep in mind that FHA cannot insure loan amount beyond a specific value At present the maximum loan amount that can be insured by the FHA is $362,790 and the lowest is $200,160. However, this value can vary according to the area where you live in.
Depending on the location of the property the FHA would opt to finance either 98 .75% or 97.75% of the assessed value of the property or its selling price whichever is low in amount.
Qualifying for the bad credit FHA mortgages
Qualifying for these mortgages is easy They require you to have a legal social security number and you should be a legal resident of the United States Besides, this you should be also of the legal age to apply for the mortgage.
Besides, this you are required to fulfill the income requirements for these loans. Though FHA does not have any minimum income requirements but you are supposed to prove that you have a stead income from the last 3 years. You are also required to prove that you paid your bills on time.
With FHA mortgages you are required to prove that 29% of your income goes towards the housing costs and 41% goes towards the expenses and the long-term debtsThe mortgage lender does check your credit score buy your application cannot be rejected based on this.FHA allows you to borrow mortgage even if you have bad credit and hence helps you in re-establishing your credit.
The closing costs with the FHA mortgages are same as the conventional loans excepting that you would have to pay the extra FHA mortgage insurance premium. You are supposed to pay up to 2.25% of the mortgage as the up-front mortgage insurance premium.However, this premium can be refunded partially if you make your payments fully on time for the first seven years.
The benefits of qualifying for these loans
Choosing a bad credit FHA mortgage can be advantageous in a number of ways especially in case if you are a first-time homebuyer or you do not have enough money to pay a down payment and you wish to have low monthly payments.
If you find yourself in any of these situations then taking an FHA mortgage can help you buy a house according to your choice.Some of the benefits of taking these bad credit FHA mortgage loans include :
Small down payment: With these loans you are supposed to pay a small down payment amount as much as 3%.
The cost is low: The FHA loans are comparatively less expensive than the conventional mortgages. They offer interest rates lower than the rates usually charged on the mortgages.
Qualifying for these loans is much easier than qualifying for any conventional loans. Lenders usually do not reject the loans that are insured by the FHA.
With the help of these loans people with bad credit can also be applicable. Even if you have faced a bankruptcy in the past and it has been 2 years since the discharge then you can apply for these loans If you have paid off all pending judgments and a plan has been developed with the IRS to pay off the tax debts r it has been 3 years since the foreclosure you can easily apply for these loans.
FHA has been giving out mortgage loans since 1934 and hence the protection offered by these loans is in anyway more than that offered by any other lender.
Points to consider
When taking the bad credit FHA mortgage loan you should keep in mind that FHA does not give out the loans directly nor does it decide on the interest ate applicable on these loans. FHA just insures the loans so that in case of default some part of the amount is paid by them and ; some by you. However It is important that you compare the rates offered by the different lenders approved by FHA so that you can get the best deal.
The bad credit FHA mortgage can either be used to buy or refinance a house either a single family or a multi-family house.
So even if you have bad credit you can keep your worries aside and apply for these loans.
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