FHA Home Loan

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HOPE for Homeowners (H4H) Program is here!

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Testimonial

“I needed a home for my family, but none of our local banks were willing to provide us with a mortgage. With only enough money for a small down payment, FHA Home Loan provided me with the FHA Mortgage that I was looking for and allowed us to have the home of our dreams.”

How You Can Get An FHA Loan With A Credit Score Below 580

If you have a credit score below a 580 it might be extremely hard to get a FHA loan in this current lending market. But there are other options when it comes to getting an FHA loan. Even though a FHA loan will insure loans below a 580 credit score the secondary market that buys and sells mortgage paper has set the stage as to what will be bought and sold in this market.

When an FHA loan is bought and sold in the secondary market, investors watch a particular borrower's performance. If they notice a particular borrower is not performing well on the secondary market they pull the plug on financing that type of risky borrower. So it's essentially like watching your own stock portfolios performance. If that particular portfolio of yours is not doing well you stop investing your money in that stock. An FHA loan works the same way.

Over the last 6 to 7 years FHA loan were being written for all types of borrowers including borrowers below a 580 credit score. Until now there was never a credit score requirement for an FHA loan. Most banks are requiring a middle credit score of 580. There are exceptions to this rule. Some banks will allow a FHA loan to go through with a credit score below a 580 if the bank or mortgage company gets an automated approval. An automated approval is a piece of software that banks use that either says "yes" or "no". Let's assume you have a credit score of 578 and your loan file is ran through this software and it says 'yes", as long as that particular lender will allow a credit score below a 578 with a automated approval you are good to go.

Some banks have internal rules for a FHA loan they will approve as well. So just because you have a credit score below a 580 does not mean all hope is lost for an approval of an FHA Loan.

If you have a credit score below a 580 here are some factors that could possibly help to get an automated approval for an FHA loan.
- Savings in the bank
- 401k, usually $25,000 or more really helps
- Money for down payment
- Low income to debt ratios

These are some key factors that could possibly get you an automated approval for an FHA loan with low credit scores.

If you have recently been denied for a mortgage loan, get a recent copy of your free credit report and start working on your credit. The higher your credit scores the better terms you will get anyways. Bad credit does not go away; it just lingers over your head like a dark cloud. What ever your situation is there is always a solution.
An FHA Loan can be a great solution for a lot of people in today’s market. For more information about getting an FHA loan please visit FHAHomeLoans.com.