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
November 12, 2024Escrow is an important feature of most typical FHA loans. An escrow account is a third-party account where borrowers deposit funds designated for property taxes and other uses. Requirements to use escrow accounts typically stems from a need to protect all parties involved in the transaction
November 2, 2024When it’s time to consider buying a home, the Federal Housing Administration (FHA) offers two popular options. One is the traditional FHA purchase loan many use to buy a house in the suburbs. But not everyone wants to buy an existing property. Some want more control over the design and configuration of the home.
The other FHA construction loan option, the one-time close mortgage, comes in here. This option is for those who want to approve floor plans, have a say in the types of materials used to build the home and choose its features.
October 31, 2024When buying a home for the first time, it helps to know how long the process can take. How do you know if your appraisal report is delayed if you don’t know how long the FHA allows for the process to be completed? How long does it take to get from the final offer to closing day? A “typical” FHA loan process may take up to 45 days from start to finish. Several factors can influence this timeline.
October 30, 2024Just because an FHA loan is designed to be more lenient with FICO scores and require a lower down payment doesn’t mean the house you buy with that loan is less than ideal. Did you know that FHA loans have minimum property standards to ensure the home is safe and livable? Those standards require the home to have an “economic life” for the entire term of the loan so you can freely sell the property later on if you choose to do so.
October 29, 2024Buying a home with an FHA mortgage is a major life decision, and preparation is essential before you start house hunting or consider making an offer on a property.
How to get started? In the early stages, establishing your budget and how much work you need to do on your credit is key. But once you have gotten past the initial phase of that planning you’ll want to consider the house itself and what you want from it.
