The Federal Housing Administration, the government agency that backs FHA Loans, had a policy to flag an applicant who was rejected for an FHA mortgage. This flag stayed with the borrower(s) for a six-month period, and it was accessible to all other lenders.
The idea was to help them decide if you were qualified for a loan. Some believe that lenders could be biased, based on this information, and tell you ‘no’ even if you are able to handle the loan.
Now that FHA has stopped using this flagging system, lenders will not know if a person has been denied in the past.
How Will This Help You?
Before, if you were in the process of getting an FHA Loan and the lender denied you, the denial followed your assigned case number. If you went to another lender, they might also deny the loan application based on that first denial.
Now, with the update to FHA, denials will not be required to be attached to one’s case number. It’s like giving you a fresh start, so they’ll look at your application without any preconceived ideas. This helps people who were turned down before have a better chance of getting a loan.
Why Choose An FHA Loan?
You could qualify for an FHA Loan, even if you’re carrying debt or have a lower credit score. In fact, FHA Loans are often attainable even if you’ve dealt with a bankruptcy or faced other financial challenges in the past. So, don’t let credit concerns hold you back.
If you’re self-employed, a first-time homebuyer, or someone with unconventional credit history, an FHA Loan might be an excellent fit. These loans don’t come with income limits or geographic restrictions, and their qualification criteria are more flexible. Plus, FHA Loans typically have a lower down payment.
Remember, while the FHA Loan is a solid choice, it’s just one of many options for homebuyers. If you’re seeking a zero-down payment option, take a look at our USDA Loans or VA Loans, both of which require no down payment at all.
You’ll want to meet these requirements to qualify for an FHA-backed home loan:
- FICO score of at least 580
- 3.5% minimum down payment plus closing costs and prepaid fees
- PMI (Private Mortgage Insurance) is required on all loans
- 2023 FHA Loan limits:
- 1 Unit= $472,030
- 2 Units= $604,400
- 3 Units= $730,525
- 4 Units= $907,900
- The home must be your primary residence
- You must have a steady income and proof of employment
Questions About FHA Loans?
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