FHA loan may be the answer if you are worried that they will deny your loan mortgage because you have a low credit score when you apply. It is relatively easier to get approved to have an FHA (Federal Housing Administration) loan because this is a government-backed mortgage under the Department of Housing and Urban Development. Thus, you will have an easier time complying with the financial requirements to get approved. Believe it or not, there is a chance of getting approved with an FHA loan even if you have economic issues like a low credit score because you are riddled with debt or even bankruptcy.
Here are the details to help you prepare for your FHA loan application:
1. The house you are looking at must have an FHA-approved appraisal.
2. The property that you are considering must be your primary residence. You can’t apply for a second home or a vacation house using an FHA loan.
3. You only have 60 days after closing to occupy the home.
4. Your downpayment can go as low as 3.5% if your credit score is 580 or higher. If your credit score is lower than 580, talk to our loan officer for updated requirements.
5. Prepare your financial documents like your W-2, tax returns, pay stubs, and bank statements.
These income requirements are needed to prove that you have a steady income.
It would be best to improve your credit score if taking out an FHA loan can wait a few months more. Paying your bills on time and reducing the amount that you owe on your credits by not acquiring new debts can help you improve your credit score in as early as six months. You can also improve your debt-to-income ratio (DTI). The DTI is the percentage of your income that goes to repay debts, so the lower your DTI, the better deals you can get in your loan terms and interest rates. For a detailed explanation, we can help.