Borrowers with poor credit history, low scores, recent bankruptcy can still obtain mortgage loans under FHA insured program. You may be surprised to learn that FHA does not require a minimum credit score and it does not require all collections and charge-offs be paid prior to obtaining FHA insured mortgage. Specific lenders have specific minimum fico requirements.
Lenders with expertise in FHA loans are able to get borrowers with poor credit approved for FHA mortgage loans. Why? Because they are passionate about what they do. They treat that borrower like their last borrower. They work with the borrower to determine the period of difficulty, and they proceed to compile all extenuating circumstances and compensating factors. They ask for written explanations about any major problems--such as judgments or collections and evaluate the explanations in the context of everything the lender has learned about the borrower. The borrower is probably a good credit risk, not bad risk, if the explanation makes sense in relation to other information in the file, if the problems seem to have been beyond the borrower's control and not likely to re-occur and if the borrower has re-established a good credit history.
The lender must know how to work with the borrower to package a FHA loan to prove to the underwriter that the loan makes sense and that the borrower is a good credit risk contrary to what the credit report shows.
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