Are you struggling to buy a home by getting a mortgage due to financial constraints? Is your credit score not good enough to get a conventional mortgage? Well, you can always apply for FHA government home loans with bad credit in Chicago, IL. The government-aided Federal Housing Administration loan was designed to help potential home buyers with a poor credit history to buy property.
Compared to conventional loans, FHA loans have ample benefits that can provide huge relief to people under financial distress. Since it is backed by the federal government, it lessens the burden of stringent loan terms and high-interest rates on the borrower.
By applying for FHA loans you can enjoy the following mortgage perks.
Low Credit Qualifications: Unlike the conventional loans facilitated by traditional financial institutions like banks, you can get approved for FHA loans with a credit score as low as 500. It helps though if your FICO is between 560 and 600 or more. Nevertheless, you can expect flexible rules for FHA loans.
Grants Compensation Factors: The FHA takes into consideration multiple compensating factors within the borrower’s finances proving the creditworthiness to approve the loan application. The documents are taken into consideration as proof:
- Low debts
- Proven cash reserves
- Reduced housing payment increase
- Increase in earning potential
- Significant non-taxable income
- Residual income
Down payment is Low: FHA requires a minimal down payment that is based on the credit score of the borrower. If you have a credit score of 500 then the payment has to be 10%. A borrower with a 560+ FICO has to make a 3.5% down payment. Some lenders might agree on a 20% down payment for bad credit scores but that is negotiable.
Gift fund leniency: FHA is less stringent on gift funds. If you want to make the down payment using a gift fund then the Federal Housing Administration allows it provided it is from a family member, friend, an employer, or a union. This is more flexible compared to conventional loan facilitators that allow gift money from family only.
Reasonable Mortgage Insurance: In conventional loans mortgage insurance is mandatory and the premium amount can be quite high. That’s not the case with FHA loans. They allow a more affordable amount for mortgage insurance.
Before applying for FHA government home loans with bad credit in Chicago, IL, make sure that you connect with a trusted and knowledgeable lender approved by the Federal Housing Administration to process the loan application.