August 28, 2013
A reader asks, “I am currently buying a home on a land contract and was hoping maybe I could get it run through FHA the pay off is I think around 19,000.00 it is a trailer with a garage on it. My credit isn’t good enough to run it through the bank. I’m hoping you can help me. I have been paying on it for about 4 & 1/2 years. Please if you can help me I would appreciate it. I live off SSI because I became disabled in 1995, and have been drawing my SSI since 1996. Thank you for your time and consideration.”
This reader question is a good reminder that there are still plenty of myths floating around out there about FHA mortgages and the nature of the FHA loan program in general. Let’s address each one of the issues raised by this reader question, starting with the notion that a borrower can get a loan directly from the FHA.
“I am currently buying a home on a land contract and was hoping maybe I could get it run through FHA..” The FHA does not lend money to FHA loan applicants. Instead, the FHA loan program requires a participating lender, who receives a loan guaranty from the government for approved FHA loan applications. Borrowers do not apply directly to the FHA, instead they apply with a participating lender.
“My credit isn’t good enough to run it through the bank. I’m hoping you can help me.” We don’t know what this reader’s credit score is, so the following comments may or may not apply to this specific reader. That said, in general, FHA loan applicants with FICO scores below 500 are not eligible for FHA loans, and many lenders won’t work with applicants who have FICO scores below 620. Some lenders require FICO score minimums of 640, your experience may vary.
FHA loan applicants with poor credit should contact the FHA for a referral to an FHA/HUD approved housing counselor who can advise borrowers who to improve credit performance. Low FICO scores can hurt a borrower’s chances at FHA loan approval, and much depends on the lender standards at the financial institution where you apply. Contact the FHA for more information on housing counseling or credit score issues by calling 1-800 CALL FHA.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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