7 Roadblocks to Getting an FHA Mortgage And How To Avoid Them Completely
10/08/2010
An FHA mortgage is one of the best mortgages you can get. The benefits are numerous. First time home buyers can purchase a home with very little money down at some of the best mortgage rates available today. But there are barriers that may get in the way of your loan. The following seven roadblocks can prevent you from getting an FHA mortgage.
1. Bad credit. With loans, your credit score is always a deciding factor. Many homebuyers believe that FHA mortgages don't require strong credit. However, this is not the case. It's true that credit score requirements for FHA mortgages are not as strict as for conventional mortgages, but you'll still need to prove decent creditworthiness.
2. Late payments. If you've made late payments on any of your previous or current lines of credit, lenders will hesitate to offer you a loan, whether it's an FHA mortgage or something else. Try to make all payments on time. If you do make a late payment, do as much as you can to outweigh the bad with good. Make some early payments, or pay off the account faster than anticipated. Do everything possible to show lenders that you are on solid financial ground.
3. Tax liens. You aren't authorized to take on an FHA mortgage if there are any federal tax liens or federal liens of any kind outstanding against you.
4. Ongoing collections. If any collections agencies are currently pursuing collections from you, this will tip lenders off to the fact that you're not financially solvent. Make sure there are no ongoing collections linked to any of your accounts before you apply for an FHA mortgage.
5. Cash shortage. Though FHA mortgages require very low down payments, they do still require down payments. One of the stipulations made by the FHA, however, is that you can't use an additional loan to make the down payment. If you have no cash saved whatsoever, you won't be able to take out an FHA mortgage.
6. Foreclosure. If you've been through a foreclosure in the past, lenders may consider you a bad risk and refrain from providing you a loan. It is extremely difficult to get an FHA mortgage for a home purchase if you've had a previous home foreclosed on. The purpose of the FHA is to provide housing for families and individuals who wouldn't otherwise be able to afford it, and if you've been delinquent in the past, this demonstrates that you aren't able to manage what you've taken on. You'll need to prove that the foreclosure occurred due to circumstances fully beyond your control.
7. Bankruptcy. A bankruptcy can make it very difficult to get an FHA mortgage. You'll have to wait at least a year before you can apply, and you'll probably have to wait two years or more. You'll need written approval from the court, via the bankruptcy trustee, in order to pursue a loan. Work on repairing your credit score and saving money to prove that you're a good risk to lenders.
