Wednesday, April 14, 2010

FHA home finance for bad credit holders

You have bad credit:

If you have bad credit it does not mean the end of the world for you. Probably, it is the right time for you to approach any FHA approved lender. Don’t be surprised over statements of approaching lenders in spite of your bad credit. Because, FHA home finance is offered even to people who have bad credit, under certain conditions. Therefore, it is not the end of your dream to own a house.

Why FHA offers loans to people with bad credit:

There are several reasons due to which you may get bad credit. First is of course, your intention of not paying. Probably in this condition, no lender can help you out. However, think of a situation in a particular month, in which you were short of money but you wanted to clear the mortgage payment under any circumstances. But you could arrange money only day before the last date for payment. Even then you wanted to pay and so you deposited a check but it could not be cleared due to some mismatch in the signature and ultimately payment could not be made which created a negative credit score for you. Think of somebody else, who lost someone in a fatal accident and so they were so much in shock that he could not pay the mortgage even though they had sufficient balance in his account. So, though technically, in the last two situations, people have defaulted in making payments but if you try to understand their situation, you can find that their intention or motive was not wrong. They wanted to pay but could not due to reasons beyond their control.

Lenders who offer FHA home finance consider such reasons which are beyond the control of the borrower, which created a bad credit score. Therefore, if you provide a good explanation to FHA approved lenders and if they are satisfied with your reasoning they may offer you home financing to purchase a home for you or your family.

Criteria for obtaining FHA home finance for Bad Credit Holders:
You can be eligible to borrow FHA home loans if you meet the following conditions:

FICO score: Can be lower than those for a conventional loan.

Bankruptcy: If your bankruptcy was completed more than three years ago then you can borrow FHA mortgage loans i.e. you should apply for FHA mortgage finance after three years of completing the bankruptcy proceedings. Moreover, you should be able to show the lender that you have improved your credit significantly during the last three years.

Foreclosure: Similarly, you can get a mortgage loan even after foreclosure, if you can show that you have improved your credit drastically and you are able enough to clear payments.

Bad Credit: If you are able to provide the right explanation that your bad credit is due to situations beyond your control and that you have sufficient savings to clear monthly mortgage payments, lender may approve a home loan to you. In this case, you can support your claims if you have documents that can show that for last several months/years, you have been paying bills and due within time and making full payments.

All in all, if you have bad credit, it does not mean you can’t become a homeowner now. Infact, owing a home is up to you. If your bad credit is due to reasons beyond your control, prove this to the FHA approved lenders and get the loan for buying a new house. If your bad credit is actually due your fault, even than, if you can show that now you have sufficient and regular income and that you have already improved your credit, getting an FHA finance should not be a problem for you. Ultimately, through mortgage loans, FHA offers you an excellent opportunity to improve your credit history.