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- Some mortgage lenders may choose not to lend to those with a felony conviction; however, it is possible to find lenders that will.
- The negative financial impacts of being in prison can keep convicted felons from qualifying for a mortgage.
- FHA mortgages or alternative arrangements such as seller financing may help these individuals become homeowners.
If you have a felony conviction, it's definitely still possible for you to get a mortgage and purchase a home. But like all mortgage applications, whether yours is approved depends on your finances and the rules of the lenders you apply with.
Legal rights of felons to purchase a home
Legally speaking, there's nothing stopping you from buying a house with a felony conviction. But that doesn't mean it's an easy process.
When considering your mortgage application, lenders dig deep into your financial history to make sure you have the ability to pay back the loan, and that you've paid back debts you've owed in the past. But whether they look into your criminal history depends on the lender.
Some mortgage lenders do look at an applicant's criminal record, and unfortunately they could decide to deny you or offer you less attractive terms based on your criminal background. But that doesn't necessarily mean they will.
This is why it's a good idea to apply with multiple mortgage lenders. You may also want to focus on applying with a local bank or credit union that you already have an established relationship with.
If you were incarcerated, the biggest hurdle that could prevent you from getting a mortgage often isn't a lender background check, but the ways your time in prison has negatively impacted your finances.
Challenges felons may face in buying a house
If you were previously incarcerated for a felony conviction, reentry back into the community can be difficult. Often, it's hard to find employment or rental housing, which can make it impossible to get to a place where you're financially ready to purchase a home.
Harsh Patel, co-founder of Felony Record Hub which specializes in housing for people with felony backgrounds, says that one of the most common challenges he sees people encounter is with their credit scores and their employment histories.
Here are some of the felon home buying challenges you might face:
Credit score issues
Depending on how long you were incarcerated, you may lack a credit history, which could make it hard to get a mortgage. A poor credit history can do the same.
When you're incarcerated, unless someone else is taking care of your finances, you're likely to come home to overdue bills and debts that have been sent to collections once you've served your time. This can seriously hurt your credit score and your ability to take on new debt such as a mortgage.
"Depending on the amount of debt you have, we sometimes encourage them to take a bankruptcy so they don't have to pay that," Patel says.
A bankruptcy will further push back your homebuying timeline, since many mortgages have restrictions on how soon you can qualify after significant negative credit events like this.
Employment verification
If you spent a significant amount of time in prison and have recently returned home, you'll have a gap in your employment that you'll need to explain to your mortgage lender.
Lenders want to see that you have had a steady source of income for at least the last two years. A lender may accept a letter of explanation as to why you weren't able to work, as long as you currently have steady employment and have been in your job for a certain amount of time. But if you were released very recently, you may need to wait and build up a solid work history before a lender will consider your application.
Loan approval challenges
A lack of income, high debts, or both can make it hard to qualify for a loan. Individuals with a felony conviction often have a hard time finding employment. The jobs that are available to them are generally lower paying, which makes affording homeownership challenging.
"One of the difficulties these individuals face is that on average an individual with some sort of incarcerated background, their income is typically $20,000 to $25,000 per year," Patel says. "And majority of the time with the way home prices are today, they don't qualify.
Steps felons can take to improve homebuying prospects
Improve your credit score and DTI
The rules of getting a mortgage are basically the same whether you have a felony conviction or not: You'll need a good credit score, sufficient savings for a down payment, and an acceptable debt-to-income ratio (DTI).
On a conventional mortgage, this means having a credit score of at least 620, a minimum down payment of 3%, and a DTI below 50%.
If you have a felony conviction and have spent time in prison, you'll likely need to do some work to get your finances to a place where you can qualify for a mortgage. This may include getting your debt sorted out and making on-time payments so you can boost your credit score and lower your DTI. You'll also want to start putting money away toward a down payment.
Secure stable employment
Lenders want to see that you have stable income with which to make your monthly payments. Ideally, you should have at least two years at the same job before applying for a mortgage, though some lenders will make exceptions.
Seek legal assistance
Consulting an attorney may be a good idea if you're looking to buy a house post-incarceration. They can walk you through your legal rights and help guide you on the right strategy for buying a home in your specific scenario.
Mortgage options for felons
When you're ready to apply for a mortgage, it's a good idea to apply with multiple lenders to increase your chances of finding a lender that will work with you and give you the best deal.
Applying for a mortgage results in a hard hit to your credit report, which can temporarily lower your score. Be sure to keep all of your applications within the same 45-day window so that multiple hits are seen as a single credit inquiry on your report, minimizing the harm to your score.
If you have a low income, look for programs that help low-income borrowers buy a home. There may be grants or affordable mortgages in your area that can make homeownership possible. If you're a Section 8 recipient, you may be able to use your voucher to become a homeowner.
You can also explore:
FHA loans
Because of their more lenient credit requirements, FHA mortgages are often a great option for people with felony convictions.
To qualify for an FHA mortgage, you'll need a credit score of at least 580 and a 3.5% down payment. You generally can't have a DTI above 43% with an FHA loan, unless you have compensating factors (such as a certain amount of money in the bank, called cash reserves). USDA mortgages often require a 640 minimum credit score and a DTI that's no higher than 41%.
VA and USDA loans
A VA or USDA loan might also be a good option, since they don't require a down payment. For a USDA loan, you'll need to live in an eligible rural or suburban area to qualify. For a VA loan, you must be a veteran, military member, or a spouse of one.
Private lenders
Private lenders sometimes offer loan programs specifically for lower-income borrowers or those with credit problems. Shop around and see what private loan programs could fit your specific situation and homebuying goals.
Support programs and resources
If you're having trouble buying a house, there are places that can help. The following groups offer support for felons buying a house:
Non-profit organizations
Many non-profits offer services for those who were formerly incarcerated. These are often local groups, though there are some national organizations that assist with reentry services, including the Formerly Incarcerated, Convicted People & Families Movement, the National Alliance for the Empowerment of the Formerly Incarcerated, the Prisoner Reentry Network, and Truth Be Told.
Financial and housing counseling services
Seeking counseling can also help you better prepare for buying a home. You can look to non-profit credit counseling agencies in your area for financial guidance in regard to your home purchase, and for housing counseling, look to the US Department of Housing and Urban Development.
Homebuying with a felony FAQs
Yes, felons can legally buy a house. There are no laws preventing felons from purchasing property, though there can be challenges qualifying for a mortgage.
Challenges include poor credit scores, difficulty in securing stable employment, and potential loan approval hurdles.
Options include FHA loans, VA loans, and working with private lenders who may offer more flexible terms.
Improving your credit score, securing stable employment, and seeking legal assistance can enhance your homebuying prospects as a felon.
Yes, there are non-profit organizations and financial counseling services that can provide support and resources.
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