FHA mortgage lenders are a good option for people with bad credit. These lenders are insured by the Federal Housing Administration, and they have lower requirements for borrowers than conventional mortgages. However, if you have bad credit, you will have to take a few more steps than you would with a conventional loan.
First, you need to find out whether you qualify for an FHA home loan. A standard FHA home loan requires a credit score of 580 or higher, and a down payment of at least 10%. In addition, you will need enough cash reserves for closing costs and the down payment.
You can get an FHA home loan even if you have been denied for a mortgage in the past. The lender will evaluate your income, employment record, and assets to determine if you are likely to repay the loan. If you have recently filed bankruptcy, you may also be able to get an FHA loan.
There are other government loan programs that can be helpful for you, such as USDA loans and VA loans. However, the most popular and lenient mortgage loan program is an FHA loan. Because of this, it is the best choice for borrowers with poor credit.
Another benefit of an FHA loan is that you can get a low down payment. With a conventional loan, you will have to make at least 20% down on the purchase of your home. But with an FHA loan, you can get a much smaller down payment and pay less interest over the life of the loan.
It is important to note that not all FHA lenders follow the same guidelines. Some will not accept borrowers with a FICO score below 620.
However, there are a few lenders that will work with borrowers with low scores. One such lender is Gustan Cho Associates. Their loan officers will help you establish credit and qualify for a loan. They offer no lender overlays, which means they will accept borrowers with credit scores as low as 500.
Other good options for borrowers with bad credit are Paramount Bank and Flagstar Bank. Both banks have a good rating from the BBB. Additionally, Flagstar Bank offers a grant program for up to $10,000 in down payment funds. Alternatively, you can refinance with your current lender and find a more flexible loan.
Depending on your specific situation, you may also be able to get approved for an FHA rate-and-term refinance or streamline refinance. This allows you to access the equity you have in your home.
Finally, you can use a friend or family member to cosign a mortgage. Most mortgage companies pull your credit when you apply for preapproval. If you have a friend or family member that has a good credit history, ask them to cosign. Not all lenders will allow this, so you will need to check with each lender.
Choosing the best FHA mortgage lender for you is the best way to get the best rate for your home purchase. Check out some of the top options below and then decide what is right for you.