Familiar Questions People W/ Bad Credit Have When Looking for FHA Loan

Thanks to the tough economy of the past several years more people than ever a facing problems with their credit scores. But it does not mean it is the end of the world or that you will never be able to finance a home purchase again. Here are some of the familiar questions asked by borrowers with troubled credit when they are applying for an Illinois FHA home loan.  

Will a prior bankruptcy affect my approval?

It is possible to get approved for an FHA loan if you have a bankruptcy on your record. The rules for Chapter 7 bankruptcy and Chapter 13 bankruptcy are slightly different. People that have filed Ch. 13 will need to make on-time payments to the court and other creditors for a minimum of 12 consecutive months. If the person is still making payments to the Ch. 13 trustee then the court will have to approve the mortgage purchase. In the case of a Ch. 7, the person will need to wait at least 24 consecutive months before applying for FHA loan.  

Will I be denied if I went through a foreclosure?

Obviously, any mortgage lender would be apprehensive about lending to a borrower that lost a home in foreclosure. However, the FHA guidelines state that the borrower need only wait 36 consecutive months before applying for a loan.

Will collections, tax liens and judgments stop my loan approval?

It is possible to get approved for an FHA loan even if there are judgments, tax liens and collections present on the credit report. In fact, the FHA does not have any monetary limits on the collections that are listed. Unfortunately, tax liens will have to be paid prior to closing the loan.  

If I missed one of my mortgage payments or rent payments, will that result in a turn down?

Borrowers can be approved for a FHA purchase loan if they have missed payments on rent or mortgage. However, there needs to be a solid reason for the late pay and it needs to be documented. An otherwise strong credit history that shows a couple of missed payments during a short time frame can be approved if there is just cause for the problem.

Contact me below or apply online to see if you qualify for an Illinois FHA Loan or an Illinois FHA 203k.