If you’re planning to buy a home in Tahoe yet worried about not having a stellar credit background, an FHA loan might just be for you. This loan makes it possible for people who have credit scores as low as 500 to still buy the home they want!
To understand it more, an FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA is not a lender. It’s an insurer. The money for an FHA mortgage is not given to its borrowers. Instead, the borrowers receive the funds from an FHA-approved lender, and the FHA guarantees the loan. Simply put, the loan issued by the lender to the borrower is insured by the FHA. All the borrower needs to do is pay a monthly or annual mortgage insurance premium to the FHA.
Basically, this loan is designed for low-to- moderate income borrowers who do not have very high credit scores and are unable to make large down payments. Although having a credit score as low as 500 would not hinder you from being insured, the higher your credit score goes, your amount of down-payment-required lowers in proportion as well!
If you’ve gone through bankruptcy and/or foreclosure, you may still qualify for an FHA loan.
Having no credit history is not a problem at all, too. Instead of the usual credit report, the lender may refer to other payment-history records, such as utility and rent payments. Doesn’t that simplify a lot of things?
How Do I Qualify?
- Be of legal age in the state you’re applying for a mortgage, have a valid Social Security Number, and be a lawful US resident.
- Have a steady history of employment or worked for the same employer for the past two years. Those who are self-employed will need two years of successful self-employment history documented by tax returns and a current year-to- date balance sheet and profit and loss statement.
- Must be at least two years out of bankruptcy, unless a borrower who has recently gone through bankruptcy has demonstrated that it was an uncontrollable circumstance.
- Be at least three years removed from any foreclosures and demonstrate that they are working toward re-establishing good credit.
- Use a lending institution approved by the FHA board; and
- Have a credit score not less than 500.
How Do I Pick the Right House?
Now that you have an idea about FHA loans, you’re almost ready to choose your home. Lake Tahoe offers a wide variety of homes, from 1940’s cabins all the way up to Million dollar lakefront homes. So you are sure to find the perfect home for your needs and budget.
Keep in mind, though, that not every home will automatically be approved for an FHA loan. The most common reason for not being approved in the Tahoe area is because of their heat source and electrical issues. Sometimes the heat and electrical does not meet FHA guidelines for home approval. Does that mean then that such home should just be given up? The good news: not necessarily!
There are ways to still be able to purchase it with an FHA loan. Even if that home you fell in love with doesn’t meet the FHA requirements. How? Well, through an excellent REALTOR® of course! Choosing a home with an FHA loan needs to be an organized process. There are numerous listings to be sorted through in the Tahoe Area and you need someone who will not only help you find a home that fits your needs, but also one who knows which among the choices is most likely to approved for an FHA loan.
Another good news now is that you don’t need to look far for that person at all! As a local expert in this area, I am one phone call away from answering all your questions and concerns. My team is more than willing to work hand in hand with you to find you your perfect abode in this beautiful area of the country.
There are many steps to take to finding your ideal home. Don’t waste time. Pick up the phone and call Dan Spano now!