What to Do When You Can’t Qualify for FHA Home Financing
For low-income homebuyers, qualifying for a mortgage loan can be a confusing and stressful process. Under normal economic circumstances, the Federal Housing Administration (FHA) tries to make qualifying for a mortgage easier. However, in the current climate, more FHA home financing applicants are getting denied. This doesn’t mean you have to give up on your dream of homeownership. It just means you need to start looking into alternative options. Here’s what you need to know.
Look Into First-Time Buyer Programs
One of the biggest benefits of FHA home financing is its low down payment requirement. Under the FHA program, you only need a down payment of 3.5 percent. However, if you can’t qualify for an FHA loan and are instead looking into conventional mortgages, you’ll need to have a larger down payment on-hand. Look into local down payment assistance programs and see if you can take advantage of those funds. This will help you qualify for a better conventional mortgage with lower interest rates.
Shop Around with Different Lenders
Though it’s tempting to work with the first lender that approves your application whether you’re applying for a conventional loan or government-backed loan, don’t. You need to shop around. Different lenders will view your financial situation and credit score in different ways. Just because one offers you a high-interest loan with a low principal amount doesn’t mean another lender won’t offer you better terms. Once you have several quotes, compare the terms in detail and work with the lender you’re most comfortable with.
You Can Always Wait
If you’re worried about being able to qualify for a loan in the current climate, don’t be afraid to wait. Start saving your money to build up your available down payment. Look for ways to improve your credit score and cut your regular expenses. If you have existing debt, try to pay it off before you apply for a traditional mortgage or FHA home financing program. Remember, it’s better to wait than to settle on a loan that you can’t realistically afford for the life of the loan.
Speak with a Loan Officer
If you’re feeling confused about your options or need more information on how the FHA home financing program works, you don’t have to figure things out on your own. Contact our team today to speak with an experienced representative. We’ll help you understand the different types of loans available and can make it easier for you to figure out which loans are right for your needs.