When you are working in the mortgage industry, one of the worst things that can happen is the turning away of a potential borrower for credit reasons. There is no reason you should flat out be denied getting a loan because of your credit because with a little work and the proper program, you can find yourself being a home owner. In this article we are going to go over the 2017 FHA Loan With Bad Credit so that you are not left out in the cold without the opportunity to purchase a home. It is very common that we get calls from borrowers who have recently been denied by another lender, but when you can deal with a lender that doesn’t have lender overlays, you will be in business. Lender Overlays are additional requirements lenders have to get approvals for loans. An example of this would be the requirement that all FHA Loan borrowers have a 620 FICO even though an FHA Loan can be approved at 580 FICO and under certain circumstances down to 500 FICO. When you are dealing with lenders who are denying you, they are telling you what there lender requirements are for an FHA Loan and not the true FHA Guidelines as outlined in the HUD 4000.1 Handbook. You can rest easy knowing that to get a 2017 FHA Loan With Bad Credit you will not be required to have a 620 FICO or even a 640 FICO for approval and we will outline just what the true FHA Guidelines say. If you are interested to see exactly what a 2017 FHA Loan With Bad Credit looks like, we will take a look at the true FHA Guidelines below:
– With a credit score of at least 580 FICO up to 619 FICO, the borrower can qualify for an FHA Loan with just 3.5% down payment. However, the debt to income ratio for these qualified borrowers is just 43% as is required to get an Approve Eligible using the Automated Underwriting System.
– If the prospective borrower has a FICO score of 620 or greater than an FHA Loan can be had for 3.5% down payment and a debt to income ratio of 56.9% on the backend, while the monthly housing payment can be 46.9% of your monthly gross income which will get you an Approve Eligible using Automated Underwriting System.
– For potential borrowers with 500-579 FICO, there is still an option for you out there and you can get an approval if you have 10% down payment, additional compensating factors which strengthen your applications such as reserves and additional income, and go through the Manual Underwrite for approval.
If you aren’t familiar with the HUD 4000.1 Handbook, it the latest and most up to date location to find all the FHA Guidelines for their loan programs. Now if you don’t want to read this huge book, leave it to the professionals and allow us to guide you properly and navigate these waters. This handbook is important because it states all the guidelines that FHA Lenders must abide by when originating loans if they want them to be insurable by the FHA. If a loan is originated by an FHA Lender outside of the scope of the FHA Guidelines, these lenders will have to fund the loan themselves as it won’t be able to be sold, and this can jeopardize the lender for continuing to offer FHA Loans in the future if loans are originated outside of the guidelines. If you are a potential borrower with a FICO score under 500, this is the only time you should be met with a denial for a loan as FHA Guidelines only support loans to borrowers with a 500+ FICO score. However, there is a reason for a 580 FICO minimum for the fact that it is extremely difficult to get a loan approved and through manual underwriting that is 500-579 credit score. From a personal situation, I have yet to get a loan closed for someone under a 580 credit score which is why I push my borrowers to at least have a 580 credit score and a 620 if possible if they wish to get the best loan program possible.
If there is a definite way for you to obtain a 2017 FHA Loan With Bad Credit then this would come from increasing your credit scores. It is definitely possible for you to get an FHA Loan with a low credit score, but if you can go out and help yourself by increasing credit scores, this will definitely help out a lot. The common misconception is that it takes a long time for you to raise your scores, but if you look at the following options, increases can be had in short order.
– If you do not have a currently active tradeline, then it might be a good option to get a couple secured credit cards. If you can get a secured credit card with at least a $500 credit limit, you can count on seeing your credit scores increase 10-20 points per card.
– If you currently have family members with the same last name who live with you that have active credit tradelines in good standing, you should be getting added on to their account as an Authorized User. You must make sure that this person has a low credit utilization ratio and all payments made on time. Once you are an authorized user you will get any negative marks from the card if there are any. If this isn’t done properly, you can actually harm your credit score, so do your homework before getting added on.
– If you have open medical collections, FHA exempts medical collections even if they have a dispute placed on them. When you dispute an item on your credit, it acts as if the derogatory item doesn’t exist thus increasing your credit score. For other loan programs this is an issue, but for an FHA Loan it is perfectly fine, as long as they are medical. This is an easy way to kick up your credit scores a lot.
As you have read, you can get a 2017 FHA Loan With Bad Credit, you just need to work with the right lender and with a professional who knows the guidelines and how to get you within those guidelines. Another positive for working with Loan Consultants is the fact that we don’t have Lender Overlays and will do our best to lend to the minimum standards. We look forward to helping you any way we can and getting you in the house of your dreams. Please reach out today and we can make a 2017 FHA Loan With Bad Credit a reality for you! Please call us at 888-900-1020 or email us at email@example.com.
Gustan Cho Associates
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