We closed a FHA loan with a home buyer that has a mid fico score of 580, which is below the current standard now of 640. The process does require more planning for the loan officer and buyers.
Here are the things we evaluated: (The best plan for a real estate professional is to work with a loan officer to evaluate the buyers ability to purchase a home, or just contact us.)
Credit - Their credit of course is less than ideal, but one major factor not listed on the credit report is their rental history. They had an excellent rental history and no collection or charged offs from any apartments they ever lived.
Assets - I recommended them to have (on top of their down payment) at least 2 months PITI (principle, interest, taxes and insurance) saved in any of their retirement, 401K, checking, or savings account.
Bank Statements - Bank statements took time to plan and execute. I reviewed their most recent 2 months statements and it is obvious they are spending more than what they made. Underwriters will view that as failure for the home buyers to budget their finances, and therefore cannot afford to purchase a house. I sat down with the buyers and worked out a budget for them to follow. After 2 months following the budget, they closed on their loan and were very happy.
I sincerely believe home ownership is for everyone. It does take planning, working the plan, and willingness to change your life style to fit a mortgage into the budget.
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