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Those facing credit challenges who need to refinance or want to buy a home should check out FHA home loans. FHA insures mortgages issued by its wide network of approved mortgage lenders.

FHA Loans Offer Hope for Credit-challenged Borrowers

Your spouse was involved in a car accident, and had no health insurance. You filed bankruptcy after realizing you could never repay tens of thousands of dollars in medical bills. You worked for the same company for twenty years. Then you were let go and faced the choice of keeping a roof over your head and your lender foreclosed. These situations shouldn't prevent you from buying a home or getting a mortgage refinance once you've re-established credit and have sufficient income.

FHA Home Loan Refinancing: A Chance to Overcome the Past

Here are potential benefits of FHA purchase loans or refinancing for borrowers with modest income, low down payments or little equity, or past credit problems:

  • FHA loans can be an option for those with past credit problems: FHA loan guidelines permit both foreclosure (at least three years prior to applying for an FHA loan) and bankruptcy (at least two years prior to applying).
  • Co-borrowers: Although FHA requires at least one borrower to occupy the mortgaged home as his or her primary residence, FHA does allow for non-resident borrowers. This assists low income borrowers such as young adults to gain the benefit of their parents' income when qualifying for FHA mortgages. Involving co-borrowers is a decision that should be made carefully, as all borrowers will be affected and are equally liable if mortgage payments are not made.
  • Non-traditional income and assets: FHA accepts non traditional documentation of creditworthiness in cases where borrowers haven't established credit. Rent receipts, utility payments, and other non-traditional methods of establishing creditworthiness provide opportunities for home ownership. Funds for down payments may be provided by family members, employers, government agencies (such as a state housing authority) or charitable organizations.

FHA mortgage rates remain comparatively low, which promotes lower monthly payments for new home loans and mortgage refinances. Contact FHA-approved lenders for mortgage quotes and more information about qualifying for an FHA home loan or refinance.


Karen Lawson
Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.