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How to Get Approved for FHA Loans For Bad Credit



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FHA loans for bad credit coming up hey

guys I'm Adam Lazar and my oxygen is

getting borrowers approved for a

mortgage when other lenders say that

it's just not possible today I'm going

over FHA loans for bad credit how'd it

get approved and exactly what you need

to know in case it doesn't work out and

you can't get approved I'm gonna set you

up for success here we go so talking

about FHA loans for bad credit we're

looking at purchasing a home refinancing

a home doing a cash out refinance on a

home with bad credit on FHA that's fine

the thing that ticks me off is that so

many lenders tell borrowers they can't

do it if they're below 620 like they

literally say it's impossible to get an

FHA loan below 620 I want to go through

specifics to tell you what you need to

expect and how to kind of prepare for it

the other thing that I want to emphasize

is just because you're above 620 doesn't

necessarily mean you're gonna be

eligible for FH anyways because there's

some technicalities behind some

seasoning things we'll talk about that

but I just want to encourage you that if

you've been told by a lender that you

don't qualify because of your credit

score being below 620 I want to

encourage you to take that extra effort

to make another inquiry to a lender that

actually knows what they're doing

so what's the lowest credit score you

can possibly have to get approved for an

FHA loan the answer 500 you have to have

at least a 500 middle credit score to be

approved for or to be looked at and

considered on an FHA loan now what that

means is you have three scores the

middle score is what's going to be used

by the lender to get your proof so if

you have a 519 a 501 and a 498 the 501

is the score that's gonna be used to

qualify the other thing that you want to

keep in mind is that there's two

different ways that the loan is going to

be approved you have a an automated

approval and you have what's called a

manual approval so the automated

approval is what happens is all of the

data on your applications put into a

system everybody all the lenders have

the desktop on the writer is what they

call it puts it into a system it's ran

through everything's wait your

loan-to-value your credit score your

credit history everything that's on

there what type of property you have in

just the overall application all the

factors are weighed puts into the system

and it's going to give you either

approve eligible refer eligible or refer

with caution

so approve eligible means like you're

good to go you should be fine as long as

your application as long as everything

lines up with what your application says

and we can verify that you should be

fine a referral jabal means it's a

little iffy we really need to dive into

it and have an underwriter do a manual

underwrite which a manual underwrite

things are more heavily scrutinized you

have to have a certain type of credit

history like you can't have any late

payments on any installments in the last

12 months you know you're so if you get

a refer eligible it's still possible I

we've closed many manually underwritten

loans okay but a lot of lenders don't

they just say oh we're not doing it it's

too labor-intensive it's too complex we

don't want to deal with it

so that's fine but the third way that it

comes through through the desktop on the

Raider is going to be referring refer

with caution means it's not going to be

good to go there's you can't do it on

fle and and you

gonna have to find another alternative

and we'll talk about that so some some

key points that you need to keep in mind

when looking at getting an FHA loan with

bad credit first of all you got to have

the credit score obviously if you've had

any housing events like a short sale

foreclosure a deed-in-lieu of

foreclosure there's a three year wait

waiting period between the time that

housing event happened and when you can

be eligible for an FHA loan when talking

about bankruptcy if you add a chapter 7

bankruptcy there's a two-year waiting

period if you add a chapter 13

bankruptcy there's a 12 month waiting

period you had a show that you had 12

months on-time payments on a chapter 13

bankruptcy before you're gonna be

eligible for an FHA loan so talking

about debt to income ratio when you're

doing an FHA loan basically a rule of

thumb you want to be 43 and below on a

debt to income ratio you can go up to 50

in some cases you can even go up to 57

that income ratio I I'm not saying it's

a great idea I'm just saying it's it's

possible on HUD guidelines FHA

guidelines okay so basically you need to

make double of whatever your dad is

including your mortgage and your credit

cards and car loans and all that so but

just rule thumb roundabout number you

need to make double of what your

liabilities are and that's gonna be

based off of your gross income right so

before tax if your w-2 employee one

thing you got to keep in mind to FHA

loans are only for primary residence you

can't buy a second home or investment

property with an FHA loan one thing to

keep in mind is that these loans are

full documentation loans sometimes

people reach out to me to get a bank

statement loan but they want to do a low

downpayment and it doesn't really work

that way a bank saving long it's

completely different product I'll have a

link in the description below with what

that is somebody keep in mind if you're

below 580 credit score and you're trying

to do an FHA loan minimum downpayment

10% you're not getting around it if

you're above 580 three and a half

percent down no questions asked okay but

if you're below 580 from 580 to 500 if

you're buying a house on FHA it's gonna

be 10% up if you're doing a refinance

you can go up to 96 and a half percent

if it's a rate term refinance if it's a

cash out refinance you're talking about

going up to 85 percent loan to value so

simple terms if it's a hundred thousand

dollar loan max loan

it's gonna be 85,000 if you're doing a

cash out refinance consolidating that

taking out you know funds out for a home

improvement or whatever the case is on

an FHA loan I can't stress enough the

importance of having on-time payment

history on your mortgage if you have

on-time payment history on your mortgage

meaning nothing more than 30 days late

over the last 12 months you're really

going to be setting yourself up for

success I hope that makes sense one

thing I'm going to leave you with is

that with FHA loans there are max county

loan limits I'm going to include a link

in below either in the comments or in

the in the show notes of so you can look

up your max county loan limits in your

county because a lot of times you you

may not qualify for FHA not because of

you but just because of the the loan

limits in your county so you can take a

look at that I want to leave you with if

you if it turns out you don't meet some

of those guidelines that I just went

over for a cash out refinance with bad

credit it may be that and a great

alternative would be to do what's called

like a portfolio loan or some people

call them non-qm loans these are loans

that fall outside normal lending

guidelines really designed to get folks

approved when they don't meet

traditional lending guidelines it's like

a short-term fix for short term

circumstances getting you into a

position where you can still accomplish

your goals whether it's consolidating

debt or purchasing a home it's better

than renting and it's better than not

consolidating your high interest credit

card debt so I encourage you to take a

look at a portfolio loan I'll leave a

link in the description below so you can

take a look to see maybe if a portfolio

loan is a better option if you're not

able to get approved for FHA at that

time but the thing is six months from

now once you're in the portfolio alone

once you have six months on-time

payments or twelve months or whatever

the case is at that point you would

probably refinance into a conventional

loan or an FHA loan or whatever that

makes the most sense the point is there

are options out there I just want to

encourage you to look into them so I

appreciate your time if you have not

done so yet I invite you to subscribe I

appreciate every opportunity

any questions throw comment below with

whatever questions you have on

thing like this and you're welcome to

shoot me an inquiry I'll leave the link

in the notes below but thank you

take care

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