Housing options may be limited for felons recently out of prison, but there are resources available.
At some point, felons may want to consider a house. Renting a house is one thing while buying a house is a different matter.
One of the critical factors in buying a house is financing a mortgage. There are different loan programs available.
This blog post will cover the issue of whether a felon can qualify for FHA.
- What is an FHA Loan?
- FHA Qualifications
- Why Are FHA Loans Good for Felons?
- Making Their Case for Buying a House
- Supporting a Felon in Buying a House
What is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration (FHA). The FHA is an agency in the U.S. Department of Housing and Urban Development (HUD). FHA doesn’t make loans; it insures housing loans.
Lenders are required to be approved by the FHA and offer mortgage loans at lower interest rates with more flexible qualification requirements than other types of loans.
Borrowers with FHA must pay for mortgage insurance for the first five years of the loan, which protects the lender if the borrower defaults on their loan.
FHA loans are good for those who have previously declared bankruptcy or have a lower credit score.
In order to qualify for an FHA mortgage, an application must be completed.
Felons will be relieved to know that a criminal background check is not required.
However, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 “prohibits anyone convicted within the last ten years in connection with a real estate or mortgage transaction, of any of the following: felony larceny, theft, fraud, or forgery; money laundering; or tax evasion from receiving assistance authorized or funded by EESA” (Enhanced Employment Support Allowance for those on disability).
The following are requirements for an FHA loan:
- Proof of employment for the past two years
- Credit score of at least 620 with fewer than two 30-day late payments in the past two years
- Credit score of at least 580 with a minimum down payment of 3.5% of the purchase price of the house
- Cannot have declared bankruptcy in the past two years or had a foreclosure in the past three years
- Cannot be delinquent on any federal debt, including restitution
The following documentation is required for FHA approval:
- Addresses where they have lived in the past two years
- Names and addresses of all employers plus amount of monthly wages in the past two years
- Income tax forms for the past two years
While these are less strict qualifications than for a conventional loan, there are still major challenges for felons to face.
Why are FHA Loans Good for Felons?
When considering buying a house, this type of loan is good for felons who often have a lower credit score. This typically occurs from being in prison with no job, no income, and unable to pay their bills.
Families at home often struggle financially while felons are incarcerated, and bills mount up. This frequently results in filing for bankruptcy and financial instability when felons have completed their sentence.
Their credit score is often quite low as a result of these struggles.
Felons have an unstable work history. They haven’t held a job in society since they were sentenced to prison.
Jobs for felons can be difficult to find. An FHA loan requires two consecutive years of employment before applying.
For felons in this situation, FHA loans are a good way to buy a house.
Making Their Case for Buying a House
Felons must take their situation seriously and have a goal of buying a house. No, it won’t be easy to find a house.
Doing the things that it will take to reach that goal and buy a house will be challenging, but what hasn’t been since leaving prison?
Felons need to be willing to do what it takes. They might have to live in an apartment or other short-term housing in the beginning.
They can work on building their credit score.
The Guide to Getting Employed is available to those who want a job. There are stories of success and tips for presenting themselves in a favorable light.
Supporting a Felon Wanting to Buy a House
For families of felons wanting to buy a house, take the time to help your loved one in their efforts.
Support them in returning to society and finding a way to succeed and make a difference. Don’t let them become discouraged and give up.
Encourage them to be persistent in finding and keeping a job and rebuilding their credit.
There are houses for sale to felons. There is no reason why a felon can’t be that house owner. FHA offers a reasonable alternative for financing a mortgage.
Be there for your loved one as they work to be successful and become one of 31% who don’t return to prison within two years.
What do you think about this blog post? Are you or someone you know been in the situation of trying to qualify for FHA loan with a felony? What was that like for them, and how did they achieve success? Please tell us in the comments below.