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
March 16, 2023Planning your FHA loan means asking some important questions early in the process. The most obvious question is associated with the type of home you want. How large a house do you need? FHA mortgages allow the purchase of homes with between one and four living units.
February 7, 2023There are tons of reasons why people decide that they’re done with renting and start looking into buying a home. Whatever your reason, deciding to buy a home is a big step, and one of the most daunting aspects is saving up enough money for the down payment.
January 27, 2023Before you get ready to commit to a home loan application, it’s good to review your circumstances and ask a few basic questions about your loan, your plans, and the home itself. Believe it or not, knowing what type of home loan you need is an important step.
January 10, 2023When getting ready to shop for a home loan, it's worth taking a look at your credit report. Your credit score is a big factor when lenders take a look at your loan application, and it plays a huge role in the interest rate you get.
December 23, 2022When it comes to buying a house, saving up for a down payment can be one of the most overwhelming aspects. While down payments are one of the biggest obstacles for many in the mortgage process, it helps to understand the ins and outs of why they play such a big role.
