Fha Bad Credit Loans
How can we buy this home with bad credit?
Found this home initially for rent. Beautiful 5 bed/2.5 bath for $700/mo. Owner decided she needs to sell instead of renting and will sell it to us for $95,000 if we can get financing. That’s the problem I have bad credit and husband has none. Spoke with a loan officer and she told us that if my husband opens up 3-4 credit cards and puts $3000-$5000 in a savings account we’ll be ready for an FHA loan in 90 days. How realistic is that? Seriously….I don’t know looking for the input of others.
FHA loans work with people with bad credit and look at criteria outside of the credit score; typically the downpayment is 2.5 % or so, so on a 95K loan, you would need just over 2K in down payment. Bad credit means different things to different people; if you look at the credit bureau report, you will need to see if there are any outstanding open items that must be taken care of before closing – basically they will be looking for items that could become a lien against the property if the house is financed. I am in a situation buying a $220,000 house and will need 2.5% down payment. My credit score is currently low because even though I pay my student loan every month and have proof of payments, the US Dept of Education reports me as not having made a payment in 6 years, as does their collection agency. I have 3 credit cards and they have been open for several months which is enough to establish good credit for this purpose; however, the trick is to keep the balance below 40% of the limit to maximize your score. I have been pre-qualified for an FHA mortgage; because of timing considerations, we are doing a lease purchase with a small down payment until the mortgage closes. Part of our rent during this time goes to the down payment.
There are a number of sites on the internet that will help you understand your credit score; going to the government free site www.annualcreditreport.com is a good place to start.
So yes, it is possible for this type of deal to put you into home ownership. But I would take the advice of others and talk to multiple brokers; if yougo to lendingtree.com you can have 4-5 brokers call you from an initial app.
One final caution – FHA is particular about the condition of the home and often insists on repairs being made – for example, a bad roof being replaced – before funding the sale. This is because they want to make sure you can afford the maintenance as well as the house once you are in. Because of this you may find sellers less willing to deal with FHA financing.
Finally, go to the FHA official web site for info on their programs. And, if this is a first home for you, then there are many programs available for grants for your down payment.