FHA Loans, New Borrowers, And Credit
November 27, 2024
FHA Loans And Credit Scores
What follows is not financial advice. Always consult a finance or tax professional for the most current information.
While FHA loans offer more lenient credit score requirements, establishing a positive credit history is still vital in loan approval. You’ll need to know what your lender will see in your credit report long before you submit that information to them. How many credit mistakes are too many for your lender?
There is no set metric, but to understand how the lender thinks, remember that they have to justify approving your loan based on the information in your reports. Does the data in them make it easier or harder for the lender to say yes?
Lenders use credit reports to assess borrowers' creditworthiness and history of managing debt. Managing your financial obligations is a big part of loan approval. If you need to work on your credit, there are several ways to do so before a home loan application. Start working on these issues a year in advance at a minimum.
Building Credit
Several strategies exist for building credit. Secured credit cards, which require a security deposit, can help, but you will need time to build up your credit patterns with the new card.
Responsible use of a secured card can help build credit over time, as can credit-builder loans, which involve borrowing a small amount of money held in a savings account until the loan is repaid.
The activity on these loans is typically reported to credit bureaus, helping establish a credit history.
Consider becoming an authorized user on a responsible family member or friend's credit card. This, too, can help build credit since the account's payment history may be reported to credit bureaus.
Making consistent and on-time student loan payments demonstrates responsible debt management and contributes to a positive credit history. Some services allow renters to report their rent payments to credit bureaus, which can help establish a credit history.
Read Your Credit Reports
Request a free credit report from Equifax, Experian, and TransUnion. You are entitled to a free report annually to review for accuracy and identify problems.
Did you find errors or inaccuracies on your credit report? Dispute them immediately and set up credit monitoring services to track your credit score and stay informed of any changes.
FHA Loan Articles
May 29, 2025An FHA cash-out refinance allows homeowners to borrow against their home equity. It replaces their current mortgage with a new, larger one; the borrower then receives the difference between the two loan amounts in cash. But these refinances have unique requirements borrowers need to consider on their way to filling out the application. Learn more about FHA cash out refi loans with our list of frequently asked questions.
May 21, 2025Buying a home is a major financial milestone. Paying off a mortgage in full is another one. Some borrowers are content to make the exact payment required and ride their mortgage out for the full term or until they refinance it. Others want to pay more and pay off their mortgage as early as possible. Several strategies can speed up the process for those who find the benefits of early payoff more attractive.
May 20, 2025If you are buying a home with an FHA mortgage, you’ll want to learn how the Federal Housing Administration (FHA) addresses termite and other wood-destroying pest issues that might be associated with the new property. How much do you know about termites and other wood-destroying pests? You could save time and money by knowing key details ahead of time.
May 19, 2025When you get ready to commit to buying your dream home, the FHA appraisal is necessary to make certain the house you want is suitable for the loan and to know its actual fair market value. Is it in good repair? Does it have termites or other pests? Is it near a high-noise environment like an airport or bus terminal? There are many issues to consider, and the FHA appraisal process is designed to address them, as we'll explore.
May 14, 2025When you buy a home with an FHA mortgage, you must pay for both mortgage insurance and insurance to protect your property while paying on the loan. There are important nuances to these insurance policies to know before you start. What's the difference between insurance against water damage and flood insurance? That's just one example of the "hidden" expenses of buying your new home to budget for.
