Qualifying for an FHA Loan with Bad Credit
Qualifying for an FHA loan with bad credit is more possible than many might think.
What Are FHA Loans?
FHA loans are provided by the Federal Housing Administration for first-time homebuyers and existing homeowners who wish to purchase additional homes. Bad credit does not exclude a person from applying for an FHA loan and purchasing a home.
What Factors Are Important for Getting Qualified?
Employment plays a key role in obtaining an FHA loan, even with bad credit. When applying for an FHA loan, you should provide:
- Last two years oft tax returns,
- W-2 and 1099 for last two years,
- One month of pay stubs, and if self-employed, YTD Profit and Loss Statement with tax returns for the recent 3 years.
If your employment earnings are sufficient to cover the mortgage installment of the FHA loan, then the odds are good that you will receive favorable terms, even if they have bad credit. You may also experience other benefits FHA loans, such as 100% financing, regulated closing costs, and a less than 3% down payment.
How Does Bankruptcy and Foreclosure Affect My Qualification?
It is still possible for you to apply for an FHA loan if you have faced bankruptcy, as long as the bankruptcy was more than two years ago. A foreclosure must have happened three years prior to applying for the FHA loan.
Find out more about FHA loans at FHA's website..