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.
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.
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.
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.
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.
References
- FHA.com
- Loan.com: Qualifying for an FHA Mortgage
- Federal Deposit Insurance Commission (FDIC). "203(b) Mortgage Insurance Program," Pages 21-22. Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "The Federal Housing Administration (FHA)." Accessed Aug. 15, 2020.
- Federal Reserve Bank of St. Louis. "Homeownership Rate for the United States." Accessed Aug. 15, 2020.
- Benefits.gov. "Home Equity Conversion Mortgages (HECM)." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "203(k) Rehab Mortgage Insurance." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "Energy Efficient Mortgage Program." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "The Graduated Payment Mortgage Program (4240.2)." Accessed Aug. 15, 2020.
- Rocket Mortgage. "Conventional Mortgages: Everything You Need To Know." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "Section C. Borrower Credit Analysis Overview," Page 4-C-12. Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "Section A. Borrower Eligibility Requirements Overview," Page 4-A-10. Accessed Aug. 15, 2020.
- Federal Deposit Insurance Commission (FDIC). "203(b) Mortgage Insurance Program," Pages 23. Accessed Aug. 15, 2020.
- U.S Department of Housing and Urban Development (HUD). "FHA Single Family Housing Policy Handbook 4000.1," Page 972. Accessed Aug. 15, 2020.
- U.S. Government Printing Office. "FHA Loan Affordability Act of 2019," Page 8. Accessed Aug. 15, 2020.
- Internal Revenue Service (IRS). "Publication 936 (2019), Home Mortgage Interest Deduction." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "Section D. Borrower Employment and Employment Related Income Overview," Page 4-D-14. Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "Section F. Borrower Qualifying Ratios Overview," Page F-4-F. Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "FHA Mortgage Limits." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "FHA Mortgage Limits." Accessed Aug. 15, 2020.
- U.S. Department of Housing and Urban Development (HUD). "Loss Mitigation Services for FHA Homeowners." Accessed Aug. 15, 2020.
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.
Writer Bio
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.