Obtaining an FHA Loan with Bad Credit04/21/2010 Prospective homebuyers and homeowners with bad credit may benefit from an FHA loan. An FHA loan is a popular option and it's no wonder. They're insured by the federal government. Qualification guidelines are less stringent. And even people with bankruptcies and foreclosures on their credit histories may qualify. If you're a first-time or repeat homebuyer with bad credit or want to refinance, here's what you should know about FHA loans. 8. Relax Obtaining a home loan with bad credit is possible. Just because you have made some financial mistakes in the past does not mean that you can never borrow money again, it just may be a little more difficult and costly. 7. Fees Both conventional and FHA loans involve fees. But applicants often find that FHA loan fees are lower than those associated with conventional loans. FHA guidelines detail the types and limits of fees it can charge. To understand what you're being charged and why, familiarize yourself with these guidelines. 6. Property appraisals Both FHA and conventional loans require a property appraisal as part of the mortgage approval process. If you've applied for an FHA loan you'll have to use an FHA-approved property appraiser. 5. There is no FHA conventional loan Some people incorrectly refer to an FHA loan as an "FHA conventional" loan but there is no such thing. An FHA loan is an FHA loan. A conventional loan is a conventional loan. They are different mortgage products. 4. FHA-approved lenders If you want to apply for an FHA loan, you have to work with a mortgage lender or broker that is approved by the FHA. The first question to ask before talking with anyone is, "Are you approved by the FHA?" If the answer is no, keep asking until you find someone who is. 3. Loan limits FHA loan limits vary depending on the state and county in which the property is located. The FHA has increased loan limits in several states including New York and California, and specifically in metro areas including Manhattan, Long Island, Los Angeles, Sacramento, San Francisco and San Diego. There limits are as high as $729,750. New limits should help homeowners refinance to avoid foreclosure. 2. Mortgage interest Conventional mortgages rates charge PMI or Private Mortgage Interest on loans that don't meet certain criteria. FHA mortgages also charge Mortgage Interest, but it's often lower than what borrowers pay on conventional mortgages. 1. Mortgage rates Because they're backed by the government, mortgage rates on FHA loans are usually lower than the rates offered on conventional loans that use different indices to calculate rates. There you have it! These are the top 8 FHA home loan tips you should know if you are looking for a loan with a less than perfect credit history. |
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