Are Financially Qualified For Homeownership?
When it comes to being approved for a mortgage, there are two problems that crop up time and time again. People that run into financial hard times often end up having a bankruptcy somewhere down the line. Along with a bankruptcy might come a low credit score. As you might imagine, financial chaos can stimulate a chain-reaction of negative events that seem to conspire to keep you from owning your own home. There may be help for those that feel caught in this trap. Read and find out how a government program from the Federal Housing Administration (FHA) might have you accepting the keys to your new home in no time at all.
A Bankruptcy Mars Your Record
If there is one issue that causes a black mark on your credit record, it's probably a bankruptcy. Bankruptcies can be present on your credit report for up to 10 years from the date of discharge. That's a long time to wait for a new home. For some people, a bankruptcy filing was just the wake-up call they needed. You may have recognized the error of your ways and have made great strides since the filing to get your finances in order. Fortunately, the FHA recognizes and rewards the positive moves you've made to improve your credit situation.
If at least two years have elapsed since you received your final bankruptcy discharge, you might be eligible for an FHA-backed mortgage loan. The FHA will evaluate your credit-worthiness on how well you are now using credit since the bankruptcy. You should have no late payments and a modest amount of new credit on your record. Of the credit accounts listed, you should have a healthy amount of credit still available. This is known as debt utilization.
Stymied by a Low Credit Score
Everyone knows that the ability to get credit is based on your credit score. The same problems that often prompts a bankruptcy can also produce a low score. As you fail to pay your bills, the record is marked as late. In time, you may even be taken to court for failing to pay your debts, and that results in judgments. All of these issues are reflected in a low score.
When it comes to scores, most consumers would never imagine that a score in the 500's would garner them a home loan. The FHA, however, does guarantee loans for those with scores between 500-579. You might be able to qualify for a loan as long as you can pay 10% down. If your score is higher, say 580 and above, you can be approved with a down payment of only 3.5%.
To learn more about how you can become a homeowner, speak to a home loans agent.