Apr 20, 2023
Reintegration into society after a felony conviction is challenging. Not only does the federal government strip you of certain rights, but you may also have a harder time buying a house.
Most of your options are limited, but some resources may help you purchase a property.
Let’s dive deeper into your options when buying a home as a felon.
Can A Convicted Felon Purchase A Home?
Many felons struggle to buy a place after being released from prison. But while affordable housing opportunities are limited, you can purchase a home despite your felony conviction.
Your record generally doesn’t eliminate your purchasing ability since most banks don’t perform criminal background checks. The only information they go through is your financial history.
You can even apply for a Federal Housing Administration (FHA) loan if you’re a felon. These loans are available to people with a low credit score and are a great choice if your felony conviction was made at least 10 years ago.
This means you may need to wait at least a while before applying.
Some requirements for buying a house as a felon are the same as purchasing a property without a criminal record. For example, you need to make a down payment and maximize your credit score before getting pre-approved for your mortgage.
The credit score might be the most important factor. This numerical representation of your credit report ranges from 300 to 850. The higher your score, the higher your chances of qualifying for a loan.
The goal of your credit score is simple – helping lenders understand whether approving your loan is a risk.
A high score indicates low chances of default payments, which is less risky for creditors. Conversely, a low score points to greater risk because it suggests poor debt management.
There are five credit score ranges:
Poor – 300-579
Fair – 580-669
Good – 670-739
Very good – 740-799
Exceptional – 800-850
Besides the basic requirements, you must prepare several documents to get approved for various loans:
-Investment accounts, real estate, car titles, bank statements, and other assets
-Alimony, car loans, student loans, credit cards, and other forms of debt
-Proof of rent or mortgage payments for the last 12 months
-Paycheck stubs from the last few months
-W-2 forms for the last 24 months
-Tax returns for the previous 24 months
These documents are generally required regardless of your criminal history.
Pro Tip: Avoid missing debt payments, making big purchases, and changing jobs before applying for a loan to help prove your finances are stable.
Housing Loans for Felons
You can qualify for a number of loans as a felon, but those provided by the FHA and the United States Department of Agriculture (USDA) are your best option.
Chances are your credit rating is low due to your conviction, and these loans are the perfect solution for your less-than-ideal score.
Conventional home loans typically require a score of about 630. Plus, you may need private mortgage insurance if you can’t make 20% of the property’s value as your down payment.
The insurance guarantees your lender receives the value of your mortgage loan if you can’t meet the conditions of your loan.
You don’t need to worry about these factors with FHA and USDA loans.
FHA loans are especially popular if you’re a first-time homebuyer due to minimal credit rating requirements and down payments. You need just 3.5% of the mortgage value as your down payment to get approval, and your credit score must be at least 580.
If your credit rating is lower, try to improve it before applying to secure better interest rates. There are many ways to do so:
-Ask for higher credit limits
-Have a strategic plan for repaying your credit card debt
-Pay your utility bills on time
-Report and fix any credit rating mistakes
Apart from the credit rating and down payment, here are a few other conditions you must fulfill when applying for FHA loans:
-You’ve been employed for the last 24 months.
-Your financial record mustn’t contain bankruptcies or foreclosures.
-You can’t be delinquent on restitution or other federal debt.
If you meet the above criteria, collect the following paperwork for your approval:
-Addresses of your whereabouts in the last 24 months
-Information about all your employers and monthly mages in the previous 24 months
-Income tax returns in the last 24 months
Another type of mortgage loan you might be eligible for as a felon might be a USDA loan. The most significant benefit of this loan is that it requires no down payments, making it the only zero-down program for persons who aren’t in the military.
To qualify for a USDA loan, you must satisfy the following requirements:
-You’ve had a job for the last 24 months.
-Your credit rating is 620 or higher.
-There has been no bankruptcy on your financial record over the previous 36 months.
-You’re not delinquent on restitution or other federal debt.
-You’ve passed the background check that analyzes your credit history.
If a USDA loan sounds good, here’s the documentation you’ll need to gather:
-Information about your employers and pay stubs in the last month
-Any divorce decrees
-Child support agreement if you receive or pay child support
-Asset statement in the last month
-Income tax returns in the last 24 months
How to Improve Your Chances of Qualifying for a Loan
Buying a house might seem impossible as a felon, but there are ways to overcome this problem and look better in the eyes of lenders. The key is to be persistent and serious about your application.
For example, one of the main factors you should worry about is being honest in your application. You must provide accurate information about past jobs, employers, and criminal records.
Lying about your felony on your mortgage application is generally considered fraud, which can result in more prison time.
Furthermore, you might need to step outside your comfort zone for a certain period by renting an apartment or finding other short-term housing solutions.
You can also try to improve your credit score and demonstrate your eagerness to reintegrate into society by completing re-entry programs.
Another great idea is to obtain further training and education to acquire the skills and knowledge necessary for finding a job.
Did you know? Some of the best re-entry programs in the U.S. are the Safer Foundation, Friends of Returning Citizens, and the Prison Entrepreneurship Program.
Lenders will welcome your efforts and be more likely to accept your application.
The Housing Market Is Open to Everyone, Including Felons
The key to buying a house with a felony conviction is to be committed and honest. So, don’t give up – the road to approval is rife with challenges, but it’s the only way to get back to normal life.
With FHA and USDA loans available, there’s no reason you shouldn’t try to raise your credit score and obtain your financing.