A foreclosure on a home occurs when a homeowner does not pay their mortgage. If you’re unable to pay off your home loans, then your home may be entered into a foreclosure auction.
Being foreclosed on a home can be a devastating experience, both emotionally and financially. The good news, however, is that you still may be able to receive an FHA mortgage after a foreclosure. In other words: You still have home financing options, even after your home has been taken away from you by your previous lender.
How Does an FHA Mortgage Work?
A Federal Housing Administration (FHA) loan is a home financing option that’s intended primarily for borrowers who have low-to-medium incomes. Applicants with below-average credit scores are also commonly approved for this particular type of loan.
These mortgages are insured by the FHA, but they’re distributed by private lenders (who must be approved by the FHA). The upshot of this is that private lenders – not the FHA – are responsible for reviewing loan applications.
Aspiring homeowners who are interested in applying for an FHA loan will also need to invest in mortgage insurance.
Can I Be Approved for an FHA Loan After Being Foreclosed On My Home?
The short answer is yes, but you’ll need to go about the process carefully. FHA loans are, in fact, commonly sought out by individuals who have previously gone through a foreclosure.
Foreclosures, as you can probably imagine, can have a seriously negative impact on your credit score. Luckily – as we mentioned above – FHA loans are great options for anyone who has a suboptimal credit history. If your credit score is above 500 (and ideally closer to 580), you could potentially qualify for an FHA loan. Bear in mind, however, that eligibility requirements will vary from lender to lender.
If your credit score is below 580, then you should also be prepared to pay a higher down payment. As a general rule, most lenders will require a minimum down payment of 10% for credit scores below 580.
Contact Us Today to Learn More About FHA Mortgages
Navigating the process of buying a home can be overwhelming. At Mortgage Solutions Financial, we’re here to guide you through every step.
Are you ready to submit your application for an FHA mortgage? If so, please contact us today. We’ll provide you with all of the background information and resources that you’ll need in order to get started!