First Time Home Buyer Seeking Home Loan With Bad Credit

This BLOG On First Time Home Buyer Seeking Home Loan With Bad Credit Was Written By Gustan Cho NMLS 873293

If you are a first time home buyer seeking home loan with bad credit, it is definitely doable. Most first time home buyers think just because they have had prior bad credit that they do not qualify for a residential mortgage loan.  I specialize in helping first time home buyer seeking home loan with bad credit. There are many borrowers who went to several lenders and were told that they did not qualify for a loan with bad credit. One thing that these lenders did not tell these borrowers is that they may not qualify for a loan with bad credit with their lending institution, but they can qualify for a home loan with bad credit elsewhere. Not all lenders have the same mortgage qualification requirements. Banks, for example, want higher credit score borrowers with no outstanding collections and/or charge off accounts. You do not have to pay off outstanding collection accounts and charge off accounts to qualify for a mortgage loan. Borrowers can qualify for FHA Loans with less than perfect credit, bad credit, and outstanding collection accounts and charge off accounts. I will go into detail on the qualification requirements per FHA Guidelines.

Getting Pre-Approved For Loan With Bad Credit

How bad can your credit be for a first time home buyer seeking home loan with bad credit? This is the most common question I get asked by a first time home buyer seeking home loan with bad credit.  A first time home buyer seeking home loan with bad credit can have prior derogatory credit due to some extenuating circumstances such as unemployment, medical reasons, divorce, or loss of business.  The first time home buyer seeking home loan with bad credit cannot have total disregard for credit.  By having total disregard for credit means that he or she cannot be blatantly late if they had the means to pay their monthly credit obligations.  For example, the mortgage loan underwriter will be reviewing a mortgage loan applicant’s credit history as well as their employment history.

Credit Payment History

If the mortgage loan applicant has a ten year credit history and on year 7 and year 8 had a bunch of late payments, derogatory credit, and collection accounts and on year 9 and 10 had re-established their credit by getting 3 secured credit cards and have no late payments since getting those secured credit cards, the mortgage loan underwriter will cross check that period of derogatory credit with the employment history.  If the mortgage loan underwriter finds that the mortgage loan applicant has lost his or her job during those periods of bad credit and has re-established their credit after the mortgage applicant gained employment again, this is perfectly acceptable and the mortgage loan applicant will most likely get his or her mortgage loan approved.

Borrowers With Disregard To Credit

However, on a different case scenario, if the mortgage applicant had a ten year credit history and has been employed consistently but has been consistently making late payments and has had continued collection accounts, charge offs, and other derogatories, then this individual will be deemed as financially irresponsible and most likely will not get a residential mortgage loan approval.  Prior payment history reflects the financial responsibility of the mortgage loan applicant and is a good indicator on their future payment prediction.  This is how mortgage lenders and other creditors view credit history and payment history.  Everyone can have a hiccup in their lives and their credit scores can be majorly hurt but what mortgage loan borrowers want to see for a first time home buyer seeking home loan with bad credit is that they have recouped and are now fully employed and have re-established credit and have no late payments in the past 12 months.

2017 UPDATE In Qualifying For FHA Loan With Bad Credit

2017 FHA Guidelines are fair and relaxed for borrowers that most folks can qualify for a FHA Loan with bad credit. Here are the basic updated 2017 FHA Guidelines:

  • Borrowers can qualify for FHA Loans with a 580 credit score.
  • Minimum down payment required for FHA home purchase loan is 3.5%.
  • 2 year waiting period after Chapter 7 Bankruptcy discharged date to qualify for FHA Loan.
  • 3 year waiting period after recorded date of foreclosure and/or deed in lieu of foreclosure to qualify for FHA Loan.
  • 3 year waiting period after short sale date to qualify for FHA Loan.
  • You can qualify for a FHA Loan with outstanding collection accounts and charge off accounts without having to pay them off.
  • You can get approved for a  FHA Loan one year into a Chapter 13 Bankruptcy Repayment Plan.
  • Borrowers are eligible for FHA Loan with no waiting period after a Chapter 13 Bankruptcy discharged date.
  • FHA allows non-occupant co-borrowers to be added to borrowers and there are no limits on the number of co-borrowers.
  • FHA will allow for 100% of the down payment to be gifted.
  • HUD allows up to 6% in sellers concessions by home sellers to cover home buyers closing costs.
The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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