Can I Qualify For Home Loan With Bad Credit?

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Qualify For a Home Loan With Bad Credit

You can qualify for a home loan with bad credit. If you have credit issues and are looking to buy a house, you have come to the right place. Buying a home coupled with bad credit can be difficult but it can be done. Many times, a borrower will apply to multiple lenders who deny them and tell them they will never be able to buy a house with their credit. They accept the news and give up their dream of ever owning or acquiring a home. They continue renting and sacrifice the joys of home ownership because of the news that they received. This is unfortunate because you can buy a house and qualify for a home loan with bad credit. There are minimal guidelines and if you meet those guidelines you can quickly be on the road to home ownership.

What Type of Loan for Bad Credit

The most common loan for someone with credit issues is an FHA Loan. Because FHA does not have requirements that are as strict as conventional loans, it is easier to qualify. An FHA loan is insured by the Federal Housing Administration and is part of the United States Department of Housing and Urban Development, also known as HUD. If you have an FHA loan, you will be required to pay a Mortgage Insurance Premium. This will guarantee that the lender will get paid in the event that you default on your loan.

What Are The Requirements for an FHA Loan

To get a home loan with bad credit and qualify for an FHA loan you must meet certain requirements. The requirements are two years of verifiable and stable employment, a minimum 580 credit score, and last but not least, one year of verifiable rental history. Rental history is verifiable by showing 12 months of cancelled checks payable to your landlord, or copies of money orders and 12 months of bank statements showing the finds coming out of your bank account, or a letter from a property management company on their letterhead verifying 12 months of on time rent payments. Furthermore, you must meet the debt-to-income requirements for an FHA loan which is currently 43% for an automated underwriting approval.

Can I Buy A House With Active Collections

First, there are three categories of collections: medical, non-medical, and charge-offs. Medical collections and charge offs are disregarded. Non-medical collections are included in the debt-to-income ratio. Any collections with an aggregate balance, meaning all collections combined, will be factored into the debt-to-income ratio. How is this calculated? This is calculated by taking the aggregate of all of the non-medical collections and multiplying by 5%. Lastly, the resulting number is added to the debt-to-income ratio as a monthly debt obligation. For example, if you have $20,000 in non-medical collections, $1,000 will be added to your monthly debt obligations, which can impact the amount of house you can afford.

You Can Buy a House With Bad Credit

So there you have it! As a matter of fact, yes, you can buy a house with credit issues because everyone has been affected by the Great Recession. Also, you are likely to either have a friend or family member who lost their job or suffered severe financial hardship due to the economic downturn, subsequently affecting their ability to qualify for a mortgage loan. Many people lost their jobs, were forced to walk away from their homes, or filed bankruptcy. As the economy improves, people are starting to have more buying power and are feeling more confident about the economy. The first step to qualifying for a home loan is talking to a seasoned industry expert who can guide you to the path of home ownership. Again, you can qualify for a home loan with bad credit or past credit issues.

About the author: Bob Vogel is a senior writer and partner of Gustan Cho Associates. Bob Vogel is a mortgage banker in the Greater Sacramento, California area, including Placer County, home to Roseville, Rocklin, Auburn, and El Dorado Hills. Bob Vogel specializes in mortgage loans for individuals who have had credit issues.  If you still have question about how to qualify for a mortgage loan with bad credit or If you can you still buy a home with bad credit. Please contact Bob Vogel at 888-900-1020 or bob@gustancho.com.

3 Comments
  1. Fred says

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  2. Sarah Stewart says

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  3. Gustan Cho of CrossCountry Mortgage says

    Arlene DiSessa did a phenomenal job publishing this BLOG. Wish Arlene DiSessa tge very best.

    Gustan Cho NMLS 873293
    The Gustan Cho Team
    CrossCountry Mortgage Inc NMLS 3092

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