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FHA Refinance For People With Bad Credit Or First Time Home Buyer

FHA refinance for people with bad credit or a first time home buyer is not an urban legend - it is, in fact, true that the FHA will accept borrowers who do not meet traditional lending guidelines.

 

An FHA loan is a federal assistance mortgage loan in the United States insured by the Federal Housing Administration. The loan may be issued by any one of many federally qualified lenders.

A lender cannot reject your FHA loan application based on a lack of credit history or your decision not to use credit. If you do not have an established credit history, or if you do not use traditional credit, the lender must develop a credit history from utility payment records, rental payments, automobile insurance payments or other direct reports from credit providers.

Do You Qualify For FHA Refinance For People With Bad Credit?

FHA loans have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford, which is why FHA criteria are generally more lenient. The program originated during the Great Depression of the 1930s, when the rates of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance that they would continue to offer loans to borrowers in marginal situations.

Some FHA programs were subsidized by government, but the goal was to make it self-supporting, based on insurance premiums paid by borrowers. This means that your FHA loan is likely to cost more each month that a regular loan - but if you have bad credit it can be almost impossible to get any kind of loan, so the additional monthly cost for an FHA loan is more than worth it.

Here is what the HUD says on its website about FHA loans for people with bad credit or a first time home buyer:

What have you heard about qualifying for an FHA Loan?

* Only inexpensive homes are allowed? Not true! * You need a lot of money for a down payment? Not true! * You need perfect credit? Not true! * Your credit score has to be at least 650? Not true! * If you ever declared bankruptcy or had a foreclosure, you're out of luck? Not true!

None of these things are true. To decide the price of the home you can buy we look at:

* Your income * Your other monthly expenses * Your credit history (this is important, but FHA's credit standards are very flexible) * Your overall pattern rather than the individual problems you may have had

Your FHA lender will decide if you qualify for a mortgage based on the "Four C's of Credit":

* Credit history - what you've borrowed in the past, and how well you've paid it back * Capacity to repay - your income and your ability to handle the monthly housing payments * Cash to close - money for the down payment and closing costs * Collateral - the home you're buying

There are some credit issues for which an FHA loan requires time to pass before you can qualify for FHA loans for people with bad credit or a first time home buyer. You will need to wait two years from the date of discharge for a bankruptcy, and three years from the date of foreclosure, if you have either of these issues on your credit record.

FHA has a requirement that you pay off any outstanding collection accounts in full before closing. If you have had some credit difficulties in the past, FHA compensating factors, such as a high level of savings and a larger down-payment, can often get your FHA loan approved.

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Change brewing on FHA loans - Baltimore Sun (blog)


eCreditDaily.com

Change brewing on FHA loans
Baltimore Sun (blog)
This translates to more than 300000 fewer first-time homebuyers and would have significant negative impacts on the broader housing market -- potentially ...
Industry Urges House Lawmakers to Reform FHAHousing Wire
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McAllen's real estate market still sluggish - Monitor


McAllen's real estate market still sluggish
Monitor
The loans are designed for home buyers with bad credit who expect that they can repair the credit and then refinance the home or pay off the loan before the ...

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Five Lies About the American Economy - Reason Online


Five Lies About the American Economy
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4), note that the real estate bust was not a problem with self-identified “subprime” loans (mortgages that are made to borrowers with bad credit and not ...

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The Subprime-Lending Business Survives, Even Thrives - TIME


The Subprime-Lending Business Survives, Even Thrives
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Mortgage brokers say it is still hard for individuals with bad credit to get home loans. The subprime home loan market peaked in 2005, according to the ...

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FHA loans boost housing market but at what cost? - Salt Lake Tribune


FHA loans boost housing market but at what cost?
Salt Lake Tribune
But not until last year had they saved up the minimum 3 percent down payment the FHA required at the time. The $8000 tax credit for first-time buyers and a ...

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