It is often said that buying a home is a part of living the “American Dream.” For many, this can seem like an unattainable ambition.
Renting can be difficult for those who have prior convictions due to Federal laws. It is a right awarded to landlords to deny a tenant due to previous convictions.
People who have criminal records or felonies may have difficulty owning a home. Based on your current situation, is it possible for you to own your home?
This begs the question: How can you get a home with a felony?
Why you want an FHA Loan
A home loan allows you to pay for your home in monthly payments. These payments depend on several factors. Your monthly payment will depend on your credit, insurance, the cost of the home, and how much money you pay before you move in. An FHA Loan will have interest and mortgage insurance.
The FHA loan is a program through the government, not a mortgage company. This means that guidelines make it a more reasonable option for:
- Low-Income Buyers: People who do not make a lot of money
- People with low credit scores: Those who have had trouble with debt
- Those who do not have a lot of money for a down-payment: This can be low-income people with difficulty saving money
- People with criminal records: Those with felony convictions
Several loan types are available to those who wish to buy a home. Some options need large sums of money upfront.
As the FHA doesn’t make you pay as much like other loan types it is a great option for felons. A down payment is the amount of money you have to pay before buying a house. If you decide the home you want is $100,000, the down-payment of that home may be $3,500.
How to get an FHA loan
There are some requirements for you to get the loan. To get an FHA loan, you must have a credit score of at least 500. The higher you can get your credit score means the less you will have to pay upfront.
The loan application requires that you show the last two years of employment. Maintaining a steady income is vital in your success.
Some people buy homes to fix up and then sell. In the case of an FHA Loan, you can’t do that. You must live in the home you are purchasing.
Another thing to think about is how much money do you currently owe other companies? How much money do you make? The “debt to income ratio” is the amount of money you spend versus the amount you make. This ratio means that approval depends on your ability to make the monthly payment.
Disadvantages of Your Criminal History and Getting a Loan
The felony conviction will not directly impact your ability to get a loan. Due to many of the requirements, it may be difficult for those who’ve served time to get approved.
One condition is that you have to have two years of a steady income and work history. Someone who has spent time in prison may not have this.
Suppose you’re still paying court or probation fees. It will be more difficult to save money for the required down-payment.
Employers may not hire you if you have a criminal background. This is part of the hiring process in many companies. A felony may cause you difficulty in finding a job. Thus, a suitable work history may be hard to provide.
Building a great credit score takes time. If you went to prison with unpaid debt that may affect your credit score when you get out.
It is not likely that a person who served time in prison will qualify for a housing loan after their release.
The Steps You Can Take Right Now
Although it may be difficult, it is still possible to get the proper loan that will help you to buy a house. There are several things you can begin working on right now to reach that goal.
To submit your application, you must first gather the information needed. Take some time to organize all your paperwork so that it is easy to find.
Maintaining employment is crucial to your success. Not only will you have to save money, but you will have to prove you can work for a long time. Lenders need to understand you can make monthly payments on time.
Paying off your past debts will help you achieve success. Making your payments on time will help too.
Saving as much money as you can make sure you can make the down payment toward your own home. Although this can be difficult if you’re paying off debt it is a crucial step in the approval process.
What You Will Need
Once you’ve prepared yourself to get the loan the application process will begin. You will have to provide documents showcasing your financial well-being.
The mortgage agency will ask you to provide the names and addresses of your previous employers. You will also need to offer the past two years W-2s and tax paperwork.
Take the time to gather your bank statements and paycheck stubs. Your check stubs and bank statements provide insight into your debt to income ratio.
Providing documentation that you are a U.S. Citizen is another step you’ll have to complete. Submit your Social Security card, birth certificate, and state-issued ID prove your citizenship.
Paying Back Your FHA Loan
An FHA loan is a great option for anyone who may have difficulty meeting the requirements of other loans. It does mean that you have to pay more for insurance protection.
Ensure that you are ready to make your monthly payments on time before applying. The mortgage protection is for the lender, not you. As hard as you’ve worked to get your home, making your payments ensures you keep it.
In Summary
A convicted felon can get an FHA loan. Although it isn’t as easy as going into a bank and filling out paperwork, it is a viable option towards owning a home.
Success in the FHA loan application process will mean having a strong work history. This may be difficult for felons and put you at a disadvantage but that doesn’t mean it’s impossible.
