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Can a Felon get an FHA Loan? All You Need to Know
Having a criminal record could stand in the way of buying a house. It disqualifies a person from getting a conventional home loan. However, specific circumstances and a lender’s policies can affect the person’s eligibility.
Lenders may hesitate before granting a loan if you have a criminal record involving felony or misdemeanor since it indicates financial instability or a potential lack of responsibility. A lender will wonder if you will repay the loan.
However, most lenders will not directly deny anybody a mortgage because of a criminal record. They may look for more information first. If you are at a lender’s seeking a FHA loan, you may need to provide these details:
The Class of Crime You Were Convicted Of
Did you face charges for a felony or misdemeanor? A misdemeanor is a minor crime, and a felony is a severe crime. For instance, stealing food is a misdemeanor, and robbery is a felony. Typically, felonies may prevent the lender from assisting you.
The Time of Conviction
A crime committed over a decade ago is less likely to affect your loan application than the same crime committed a few months ago. So, individuals may want to wait a few years after their conviction to buy a house with a loan to increase their chances.
The Circumstances Surrounding the Crime
Lenders may overlook a misdemeanor if an individual does not have a history of misconduct. However, a person convicted of financial crimes, fraud, or money laundering is less likely to get a loan. If someone seeking a loan committed a crime of moral turpitude, they will not get any loan.
How Can You Buy a House with a Felony?
Your chances of getting a loan fall with a criminal record. However, if you have a misdemeanor or felony on your record, follow these tips:
Speak to Different Lenders
Anti-discrimination laws do not require lenders to approve felons for a loan. Protections only apply to things like gender identity, religion, and race. So, lenders can deny anyone with a criminal record. However, since lenders have different policies, if one denies your application, another may accept it.
Expect Higher Interest Rates
Since lenders will want to reduce risks, they might approve your loan but ask for a higher interest rate. You can refuse and look for another company instead. However, a high interest rate is nearly inevitable if you have a criminal record.
Maintain a High Credit Score
Have you been to prison? If you have spent time there, you will need a few years of steady income and timely credit card payments to help build your credit score again. A good credit score can lower your interest rate. Your lender may also refrain from looking deeper into your past.
Avoid Background Checks
If possible, keep lenders off your history. They are less likely to try if you have a stable income and a reliable job. You can also seek a lender who does not check criminal records. However, any questions about your housing history or work from the past few years could reveal your incarceration.
Look for an Expungement
Expungement enables you to apply for a mortgage without disclosing the crime. Also, if the lender does a background check, expungement erases your crime record, and they won’t find anything. However, expungement depends on where you live, the crime you committed, when you committed it, and various other factors. You may need professional assistance from a criminal lawyer.
Conclusion
Anybody with a criminal record will find it hard to get a loan approved, irrespective of the loan they seek. However, various factors can affect the loan application process. You may want to consult different mortgage lenders and evaluate your options. Got questions? Contact ALT Financial today. We would be happy to assist you.
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