Your current home is getting older and it’s time to move on. That’s a great idea! However, you had a little trouble with your credit rating a while ago and you’re not sure if you can get the financing you need for a new house. You voiced your concerns to a good friend and he suggested that you apply for a federal home loan or FHA. Another great idea! Read on so you can find out if you qualify for a federal home loan despite your previous financial difficulties.
What is a Federal Home Loan Company?
There are many types of federal home credit companies; banks, credit unions, online lenders, and private lenders are just a few of them. All of them are able to work with you to obtain an FHA, which is a loan secured by the Federal Housing Administration. An FHA is not a loan in and of itself; it is insurance that the loan will be repaid even if the borrower cannot or does not make the payments agreed upon. This type of loan is specially crafted for lower-income borrowers, veterans, and those with not quite perfect credit ratings.
Requirements for a Federal Home Loan
Here is a simplified list of requirements to help you get a federal home loan.
- Your debt-to-income ratio – This is very important if you are to qualify for an FHA. Plainly stated, it means that your monthly debt (school loans, household expenses, credit card payments) cannot be more than 29% of your monthly income.
- The new home must be your primary residence – If you are fortunate enough to have a little lake house somewhere, it must be your secondary residence, and you must declare your new house as your residence of record.
- Your credit rating – While a federal home loan does not rely heavily on your credit rating, it does play a part in the decision-making process. A credit score of 620 or better will make the process go more smoothly. However, even if you have no credit you may still qualify.
- Employ and income – A federal home loan only requires you to report two years of steady employment and income, which is particularly helpful if you’ve had a bankruptcy in the past. If you had a foreclosure, you must provide three years of steady work and wages. Neither of these actions disqualifies you from eligibility for a federal home debt.
- No palaces, please – Because FHA loans are geared toward lower-income borrowers, the house that you wish to purchase cannot be a mansion or palace (of course); rather, it should be a well-kept, structurally sound building that will be fit for habitation with few if any repairs.
After discussing your finances with any of the aforementioned federal home loan companies, you can find out quickly if you meet the qualifications for a federal home credit. Keep your expectations reasonable, be willing to work with your lender, and you will be in your new home in no time at all.