Bad Credit Mortgage Loans: Opportunity For Home Buyers With Prior Bad Credit
Millions of Americans have gone through periods of financial hardships such as job loss, business loss, medical issues, divorce, and death in the family where their credit scores have suffered. Others were forced into bankruptcy or foreclosure due to the recent economic collapse and had to settle to job or career changes that had severe household income reduction where they had to downsize and reorganize their financial budget.
Home Loan With Bad Credit
Thanks to the Federal Housing Administration , home buyers can have a second chance in homeownership. The Federal Housing Administration also have great FHA insured mortgage loan programs for first time home buyers with prior bad credit, no credit, or limited credit histories. The Federal Housing Administration have been assisting home buyers since 1934 realize the American dream of homeownership. Unlike any other country in this planet, every hard working American can become homeowners due to the light mortgage lending guidelines of FHA insured mortgage loans.
Federal Housing Administration
The Federal Housing Administration does not originate or fund mortgage loans. The Federal and Housing Administration is a division of the United States Department of Housing and Urban Development ( HUD ) and its main function is to insure private mortgage lenders against defaults of mortgage loans through the FHA insured mortgage loan programs. Mortgage lenders need to abide the FHA mortgage lending guidelines and be a FHA mortgage lender in order to have the mortgage loans they originate insured by the Federal Housing Administration against defaulting mortgage loan borrowers.
Not Just Bad Credit Mortgage Loans: High DTI, Low Down Payment, Low Interest Rate
FHA insured mortgage loans are not just bad credit mortgage loans. FHA insured mortgage loans are for those who do not qualify for conventional mortgage loans due to high debt to income ratios, self employed mortgage loan borrowers, or those who have their mortgage loans underwater. FHA insured mortgage loans are an excellent mortgage loan program for those with lower credit scores, no credit scores, not enough credit history, prior bankruptcy, prior foreclosure, open collections, short term on the job, little or no reserves, no rental verification, and others with credit and financial issues.
No Credit History Or No Credit Tradelines: Can I Qualify For Bad Credit Mortgage Loans?
The Federal Housing Administration allows mortgage loan borrowers with little credit or no credit history eligible for FHA insured mortgage loans. You can have no credit scores and still qualify for FHA insured mortgage loans. For those mortgage loan borrowers with no credit scores and no credit tradelines, non traditional credit can be used in lieu of traditional credit tradelines. Non traditional credit are tradelines such as rental verification, insurance payments, cellular bills, water bills, electric bills, gas bills, school tuition, internet bills, and other forms of credit that the creditor does not report to the credit bureaus.
Bad Credit Mortgage Loans: Prior Bankruptcy
A home mortgage loan borrower can qualify for a FHA insured mortgage loan after a 2 year waiting period from the discharge date of the bankruptcy. Mortgage lenders do want to see re-established credit after a bankruptcy and no late payment history after a bankruptcy. HUD came out with the new FHA Back to Work Extenuating Circumstances due to an economic event mortgage loan program where a home buyer can qualify for a FHA insured mortgage loan after one year waiting period from the date of the bankruptcy discharge if the borrower has been unemployed or underemployed for at least six months prior to filing for bankruptcy and the result of the bankruptcy was due to having a 20% or more reduction of their household income.
Bad Credit Mortgage Loans: Foreclosure, Deed In Lieu Of Foreclosure, And Short Sale
For those who had a prior foreclosure, deed in lieu of foreclosure, or short sale, they can qualify for a FHA insured mortgage loan after three years from the recorded date of the foreclosure or deed in lieu of foreclosure, or three years from the date of the HUD settlement statement of the short sale. However, if you had a foreclosure, deed in lieu of foreclosure, or short sale due to being unemployed, underemployed for the prior six months leading to these economic event, you may qualify for HUD’s new FHA Back to Work Extenuating Circumstances due to an economic event mortgage program which shortens the 3 year waiting period to a one year waiting period. If you are a mortgage loan borrower in and feel you qualify for FHA Back to Work Extenuating Circumstances due to an economic event mortgage loan program, please contact me at 262-716-8151 or at www.gustancho.com .
BAD CREDIT MORTGAGE LOANS: Open Collections, Charge Offs, Judgments, Tax Liens, Recent Late Payments
The Federal Housing Administration understands that people do go through periods of financial hardship. You can have prior bad credit and open collections and still qualify for a FHA insured mortgage loan. You do not have to pay off old collection accounts in order to get a FHA insured mortgage loan approval. I strongly do not recommend you pay off any old collection account because by paying off an old collection account will reactive your derogatory credit tradeline and will plummet your credit scores. I have seen people’s credit scores dropping by 80 or more points just by paying an old collection account.
Judgments And Tax Liens
Judgments and tax liens are the worst possible derogatory item you can have on your credit report. You can get a FHA insured mortgage loan with outstanding judgments and/or tax liens only if you enter into a payment agreement with the judgment creditor and/or the Internal Revenue Service. You need a minimum of a two month payment history and provide the mortgage lender two months worth of cancelled checks. The payment agreement is not enforced by the mortgage lender after you close on your mortgage loan.
Recent Late Payments
Recent late payments are really frowned upon by mortgage lenders. You can have a recent late payment and still qualify for a FHA insured mortgage loan, however, having a history of late payments can prove to the mortgage lender that you are an irresponsible credit risk and pose a problem. One or two late payments in the past 12 months with a good letter of explanation should pose no threat, however, if you are a habitual late payer of your bills, it is strongly recommended that you wait six months of paying your bills on time and then apply then. Overdrafts in the past 12 months are really frowned upon as well. Again, as with recent late payments, one or two overdrafts are acceptable but consistent monthly overdrafts could pose a problem. There should be no bank overdrafts in the past 60 days.