I neglect my blog, it’s true. But it’s time for another installment since I got the urge. Today’s post is to glorify FHA loans for borrowers with less-than-perfect credit, little credit history, high debt-to-income ratios, or little down payment funds available.

Since my last post a year ago there have been vast changes in the mortgage industry. You are probably already aware of the fact that an entire section of the market is completely gone, being subprime loans. It’s a big factor in the current economic conditions we’re seeing in our country. That being said, FHA loans are about as good as you can get for less-than-perfect loan applications.

Don’t worry if you aren’t sure what an FHA loan is. If you feel like getting all the details, go ahead and visit hud.gov to get more info or drop me a line and I’d be happy to walk you through the basics. The most important part for borrowers is that FHA loans offer flexibility while basically nobody else does. Rates are just about the same as a conforming 30 year fixed rate to boot.

I know, I know. The title is a bit, shall we say, amgibuous (and that’s being generous). The point is that not all “free credit reports” are created equally. The ads you see on TV and online for free credit reports usually come with strings attached: costly monthly credit monitoring service.

Credit monitoring basically keeps an eye out, in your behalf, of any new blips on your credit report that transpire from month-to-month. These blips could range from new credit inquiries to new reported late payments and collections/judgements. All can have a negative impact on your options when it comes time to purchase a new home or refinance your existing mortgage.

Is credit monitoring a valuable service, and worth the monthly fee? I suppose that is up to the individual, but it is definitely something to be aware of when ordering a “free” credit report (just read the fine print - as always).

The Real “Free” Credit Report

Now then, there is a way to get a truly free credit report with no strings attached each and every year. Here’s a link to the FTC’s website with more information.

The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Nationwide consumer reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Hat tip to Todd