How to Apply for an FHA Mortgage Loan With Bad Credit

by Valencia Higuera ; Updated July 27, 2017
It is possible to obtain an FHA home mortgage loan with a bad credit history.

Items you will need

  • Income statements
  • Down payment
  • Closing costs

Provided by the Federal Housing Administration (FHA), FHA loans have helped countless homeowners obtain mortgages. It is possible to obtain an FHA home mortgage loan with a bad credit history. However, the Federal Housing Administration outlines specific home loan requirements, so before applying for an FHA loan, it's best to familiarize yourself with the requirements to improve your odds for approval.

Step 1

Keep track of your income. Retain bank statements, paycheck stubs and tax returns from the past two years or three years if you're self-employed. Show these documents to your lender as proof of steady income and employment.

Step 2

Prepare for a down payment. Bad credit mortgage applicants can expect to pay a down payment on an FHA loan. Budget your money, and set aside a 3- to 5-percent down payment.

Step 3

Plan for closing costs. Closing costs or settlement fees are associated with every mortgage loan. Plan to pay settlement fees, which are approximately 6 percent of the sale price. Talk to your lender about wrapping this amount in your mortgage loan to alleviate a financial burden.

Step 4

Shop around. FHA mortgage loan rates vary according to lender. Speak with at least three lenders, and receive a no-obligation loan quote. Compare rates, closing costs and other fees before choosing a lender.

Tips

  • It's possible to obtain an FHA mortgage with a bankruptcy or foreclosure on your credit report. However, the bankruptcy discharge must be more than two years old, and foreclosure must be more than three years old.

Warnings

  • The maximum loan amount on an FHA mortgage varies by state. Check www.fha.com for information on your state.

About the Author

Valencia Higuera is a freelance writer from Chesapeake, Virginia. She has contributed content to print publications and online publications such as Sidestep.com, AOL Travel, Work.com and ABC Loan Guide. Higuera primarily works as a personal finance, travel and medical writer. She holds a Bachelor of Arts degree in English/journalism from Old Dominion University.

Photo Credits

  • the cost of housing image by Pix by Marti from Fotolia.com