Why An FHA Loan Is A Good Choice When You Have Bad Credit
Posted on: 17 June 2020
If you experienced some financial issues that impacted your credit score negatively, you might not think you can qualify for a mortgage loan. With bad credit, getting a mortgage is more challenging, but it is not impossible. If you have less than perfect credit, you may want to consider evaluating an FHA loan. FHA mortgage loans are ideal for people who do not qualify for other loan types, and there are several reasons why this might be a good choice for you.
You Can Qualify with a Low Score
People with credit scores of 760 or higher often fall into the "excellent" credit category. You will fall into a different category, though, if your score is lower than this. With FHA loans, you do not need excellent credit scores. Many lenders can help you get approved if your score is only 580 or higher. If your score is less than this, you may still qualify, but it might be more challenging. If you are not sure what your score it, look it up or talk to a lender. If your score is 580 and you meet other requirements, you may be eligible for an FHA loan.
You Do Not Need a High Income
The FHA program is a mortgage program that encourages people to become homeowners. When the Federal Housing Administration created this program, the principal intent was to help people qualify for mortgages when they did not meet the eligibility requirements for other loan programs. Therefore, you do not need a massive income to qualify for an FHA loan. If you have a steady job and can afford a loan, you will likely be eligible for an FHA loan.
You Do Not Need A Lot of Cash
One other benefit of FHA loans is the low-down-payment requirements. Getting approved for an FHA loan will not be dependent upon having a large down payment. If you have some money to use for the down payment, you may qualify. For example, you may only need 5% of the home's purchase price or a little more, but you will not need 20% of the purchase price as with other loans.
They Factor in the Whole Picture
The last thing to know is that FHA lenders factor in a person's entire picture. If you do not meet a certain requirement, they may examine other parts of your life to help you qualify. Getting an FHA loan can still be challenging for some people, but it is often less challenging than other loan options. You can talk to a lender to learn more about the mortgage loan programs you might be able to use.
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