Options for felons are limited after their release, as they lose many of their rights. Housing choices are difficult to come by, but there are resources available. At some point, felons may want to consider owning a house.

Can a Felon Buy Property? This blog post will cover the issue of whether or not a felon can buy property.

• What Is Involved in Buying Property?
• Types of Loans
• Why Are FHA and USDA Loans Good for Felons?
• Making Their Case for Buying Property
• Recommended Action

What Is Involved in Buying Property?

The decision to own property is not an easy one. There are a number of factors involved in buying a house:

• Save for a down payment
• Maximize one’s credit score
• Get pre-approved for a mortgage

A credit score is a numerical representation of a credit report. Credit scores range from 300 to 850, and the higher the score, the better your credit. A credit score will allow someone to see if he or she is in a position to get approved for a mortgage.

The credit score requirements for a home loan depend on the type of loan. When buying a house, you want your credit rating to be as good as it can be. If the balances on your credit cards are high, it will negatively affect your credit score.

A felon can get pre-approval for a mortgage by preparing several documents. The following are typically required to buy a house:

• Tax returns for the past two years
• W-2 forms for the past two years
• Paycheck stubs from the past few months
• Proof of mortgage or rent payments for the past year
• A list of all debts, including credit cards, student loans, auto loans, and alimony
• A list of all assets, including bank statements, auto titles, real estate, and any investment accounts

It is advisable to not change jobs, make big purchases, or miss any debt payments before seeking pre-approval.

Types of Loans

While there are several types of loans available – conventional, FHA, and USDA – the latter two offer the most promise for those with less-than-desirable credit scores.

A conventional home loan usually requires a credit score of at least 620 and private mortgage insurance (PMI) if a borrower does not have at least 20% of the value of the home in cash for a down payment.

PMI is an insurance that guarantees a lender will receive the value of the mortgage loan if a borrower cannot fulfill the terms of the loan and ends up in foreclosure.

FHA loans are the most popular type of loan, especially for first-time homebuyers because of their low down payments and minimal credit score requirements. To get approved for an FHA loan one must have a minimum of 580 on their credit score and at least 3.5% in cash for a down payment.

If a felon doesn’t have a credit score of at least 580, it is highly recommended to improve one’s credit before applying for this type of loan.

The following are requirements for an FHA loan:

• Proof of employment for 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

USDA loan qualifications state that no money is required as a down payment to purchase a home. This is the only program available in the U.S. that offers zero-down mortgages for those that are not military veterans. Also, USDA home loan rates are typically less than other home-loan rates.

The following are requirements for a USDA loan:

• Proof of employment for the past two years
• Credit score of at least 620
• Cannot have declared bankruptcy in the past three years
• Cannot be delinquent on any federal debt, including restitution
• Background check

The following documentation is required for USDA approval:

• Names and addresses of all employers plus pay stubs for the past month
• Divorce decree or child support agreement if paying or receiving child support
• Income tax forms for the past two years
• Asset statement for the past month

Why are FHA and USDA Loans Good for Felons?

Most lenders do not conduct criminal background checks on mortgage applicants. However, they will obtain their credit report, verify their income, and verify their residency for the past 10 years.

Background checks on individuals applying for an FHA or USDA loan will evaluate the person’s credit history and credit score, verify the person’s current employment status, and verify the person’s identity. Criminal history is generally not considered when applying for an FHA or USDA mortgage.

When buying a house, these types of loans are good for felons who often don’t have enough money to qualify for a mortgage through conventional loan programs. This typically occurs from being in prison with no job, having no income for a period of time, and being unable to pay the 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 frequently have an unstable work history as well. They haven’t held a job in society since they were sentenced to prison. For felons in this situation, FHA or USDA loans are a good way to buy a house.

FHA and USDA loans also offer competitive interest rates, that align with market-trends. With USDA loans, we recommend buying in rural areas. The USDA loan is a rural housing loan that offers the advantage of not requiring a down payment and not having a maximum home purchase price.

However, it’s important to note that this loan, provided by a government agency, does have specific property standards that mandate the home to be situated in a rural area. Additionally, there are income limits for the buyer, and mortgage insurance is required for the entire loan term.

Making Their Case for Buying Property

Felons must take their goal seriously and be persistent. It won’t be easy to buy property. 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?

It is essential for felons not to lie on a mortgage application. This includes giving false information, omitting past jobs, fabricating previous employers, as well as being dishonest about their criminal record. Lying about a felony on a mortgage application constitutes fraud, punishable by possible prison time.

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 until they can get themselves in a position to be able to buy property.

They can also work on building their credit score and demonstrate their desire to live an honest life by going through a re-entry program or getting further education and training to get the knowledge and skills they need to find a job.

Having their record expunged sends a strong signal that they are serious about re-establishing themselves and living an honest life.

Recommended Action

Felons that want to buy property need to concentrate on establishing a positive work history and re-building their credit score. They shouldn’t give up but rather continue in their efforts to buy a house just as they did their sentence, one day at a time.

Felons trying to buy property should rely on their family and friends for support. There are many houses for sale. There is no reason why a felon can’t be a property owner. FHA and USDA offer reasonable alternatives for financing a mortgage on the property they want to buy.

What do you think about this blog post? Can a Felon Buy Property? Are you or someone you know been in the situation of trying to buy property with a felony? What was that like for them, and how did they achieve success? Please tell us in the comments below.