FHA - Bad Credit Borrowers Have Options
FHA - Bad Credit Less of a Problem - The big reason FHA is popular with bad credit borrowers is simple: FHA is only concerned with the last 24 months of your bill paying history. Qualifying for a conventional or conforming loan relies heavily on your FICO score which, if tarnished, can be a thorn in your credit "back-side" for 7 long years ! Remember that missed car payment 4 years ago? Probably not. How about the 2 - 30 day late credit card payments that happened 5 years back when you were out of work for 3 months? Maybe you forgot about these "minor credit slip-ups" but keep in mind, the credit bureaus will quickly remind you. Just apply for a home loan and these nasty "items" will jump off the page while you and the broker review your credit history report. So with FHA, bad credit is less of a problem because they realize that your financial situation can improve and shouldn't be based on a rolling 7 year time frame. Your financial situation can improve on many fronts. FHA realizes that your income may have increased over the years, thus improving your debt-to-income ratio. Your spouse may have begun working which increases overall income to the household. You may have documentation that you become an "avid saver rather than spender". You are paying all bills on time. Going thru the FHA loan process you'll find far more consideration placed on your current financial situation . Keep in mind...you will need adequate documentation to qualify for FHA - bad credit aside, the loan process is still formal with regards to verifying personal information, bank accounts amd employment. So be ready. Here is what you need to be aware of for FHA qualification