If there was ever two issues that involves both finances and emotions, it might be home ownership. Unfortunately, if you have had to declare bankruptcy and your credit score could use some work, those issues can often derail any plans to buy a home of your own. Fortunately, the Federal Housing Administration (FHA) has a home loan program for you, even if you have a past bankruptcy and a low credit score. Read on to learn more.
If you have a chapter 7 bankruptcy
This is an undeniable black mark on your credit, and in many cases lenders shy away from those with filings. Whatever reason led you to seek the fresh start that a chapter 7 bankruptcy provided, you may still have an opportunity to become a homeowner using one of the two FHA loan programs. The key factors here are how long ago you had your bankruptcy finalized and what you have done to improve your credit picture since that time.
FHA lenders want to see that a two-year period of time has passed since your chapter 7. You should start counting from the final declaration, not the initial filing to determine your eligibility. The time since your filing is only one part of the qualifications; you also need to show a sparkling and healthy use of credit since that time. Your credit report may contain that federal filing black mark, but it should also show that you have been acquiring new credit carefully and prudently, paying your bills on time and not using up too much of your available credit.
If your credit score is low
Many conventional lenders are reluctant to lend to those with scores in the 500's or 600's, but not the FHA. Those that do lend to those with lower scores penalize them with higher interest rates on the loans offered. If you have at least score of 580, you can get an FHA loan with a mere 3.5% down-payment. If your score is between 500 and 579, you can still get an FHA loan, but your upfront cash required would now be a still-reasonable 10% down.
Getting your credit shaped up
Take care of the following issues, and become a homeowner soon:
1. Be aware of credit inquiries on your account. You do need to acquire credit, but take your time with applications and space them out. Each inquiry lowers your score, since it makes it appear that you are desperate for credit.
2. Pay your bills on time, every time. Even a one-time lapse over the course of a year or so looks bad. The later you are with your payment, the worse it will look.
3. Avoid having too many open accounts in a short period of time. The age of your accounts counts.
4. Use some, but not all of your available credit. Running a card up the limit is bad.
5. View your credit report each month and take care of any errors right away.
To learn more about how you can realize your dream of becoming a homeowner, speak to a lender like Blue Wave Funding today.
