Qualifying for FHA Home Loans with Bad Credit

Becoming a home buyer is an exciting event in a person’s life, but there are a lot of financial avenues to explore so that the purchase of a house and the ongoing payments don’t overwhelm the balance of income, bills and other financial obligations. The assistance of a Financial Housing Administration (FHA) loan is one way that a potential homeowner can get the financing necessary to purchase a house, but there are certain FHA loan qualifications that must first be met.

Can bad credit history ruin a good future?

When a mortgage lender examines a potential home buyer, they will look into the financial history of the potential buyer. This is because the mortgage lender wants to make sure that a borrower will be able to sustain the rate of repayment without defaulting on the loan. Having bad credit is sometimes seen as a roadblock to purchasing a house, but that is not always the case. In fact, the federal government has a number of programs available to people with bad credit who hope to purchase a home.

The FHA loan program is part of the U.S. Department of Urban Housing and Development (HUD). When borrowers, even those with bad credit, apply for a loan, it will be insured by the FHA. This means that borrowers will also qualify for low down payments, low closing costs and easy credit qualifying, making it more affordable all around. This increases the likelihood that a borrower will be able to repay the loan.

Looking past bad credit

In order for FHA loan underwriters to help people with bad credit qualify for a loan to purchase a home, they will look at other aspects of financial history. This may include examining utility payment records, rental payments, car insurance payments, or how long it has been since the borrower had financial lapses on credit payments or filed for bankruptcy. In some cases, such as in a bankruptcy filing, they will request a full explanation of the situation.

It is especially helpful if the borrower can show that there have been consistent payments on any financial obligations since the time when credit was initially damaged due to failure to repay. Another aspect loan underwriters will look at is the employment of the borrower. A steady job with a good income will help bad credit look better if underwriters decide the income is going to be good enough to help a borrower repay the loan on time.

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