What You Need To Know About FHA Loans And Preapproval
November 26, 2024
Preapproval for a home loan means a credit check, so be prepared to fill out basic credit information as part of the process.
Some at this stage might wonder: "Will applying for pre-approval hurt my credit score?"
What's a FICO Score and Why Should I Care?
Your FICO score is a three-digit number that sums up your risk as a borrower. It's based on your credit history, and FHA lenders use this score to decide if they want to give you a loan and what interest rate they'll charge. The higher your score (the best is 850), the better your chances of getting a good deal.
Good News About Pre-Approval
Applying for pre-approval typically results in a temporary change to your FICO score. Why? Because lenders perform a "soft inquiry" on your credit. It's like a quick background check, not a full-blown credit application. They can look at your credit history, but it doesn't affect your score.
Shop Around For An FHA Lender Without Worry
You know how you compare prices before you buy something big? Well, FICO knows you do that with mortgages, too. They have a "rate shopping window," usually 45 days long, and during this time, you can apply with multiple FHA lenders, which only counts as one inquiry on your credit report.
Things That Can Affect Your Score
If you apply with FHA lenders over a long period (past the 45-day window), it can look like you're desperate for credit.
Also, make sure your credit report is accurate. Credit report mistakes are more common than you might think. They can lower your score, so check your credit before you apply and fix any errors.
Keep Your FICO Scores Safe
Want to minimize any impact on your credit score? Here's one plan to consider:
- Apply within the 45-day window: Get those pre-approvals done quickly to take advantage of the rate shopping feature.
- Don't go overboard: It's good to compare offers, but don't apply with every lender under the sun. Pick a few that seem like a good fit.
- Check your credit report: Before applying, get a copy of your credit report and make sure everything is correct.
Keep in mind that pre-approval doesn't guarantee you'll get the loan. It's a good estimate, but the lender will examine your finances more thoroughly before they give you final approval.
Getting pre-approved is a smart step when you're buying a home. Be smart about how you apply, and keep your credit report clean.
FHA Loan Articles
October 25, 2024Mixed-use properties combine residential and commercial spaces. Some borrowers applying for FHA home loans want to know if purchasing such a property using an FHA single-family home loan is possible. The FHA does allow the use of its loans for mixed-use properties, but certain conditions must be met.
October 24, 2024Buying your first home is a major milestone. If you use an FHA mortgage to buy your home, you’ll have two types of insurance to consider. One type is the FHA-required mortgage insurance premium, which is paid for 11 years or the loan's lifetime, depending on your down payment, loan term, and other variables.
October 22, 2024While the Federal Housing Administration sets rules for FHA loans, lenders retain some flexibility in determining interest rates, fees, and specific loan terms. Depending on circumstances, the FHA loan offered by your local bank might not be as competitive as one offered by a credit union or an online lender specializing in FHA products, or vice versa.
October 17, 2024Buying a home is one of the most significant investments Americans make. Understanding how to strengthen your credit profile and leverage the power of credit counseling is essential for successfully navigating the FHA loan process. What should you know about your credit to make the most of your home-buying journey?
March 13, 2024There are plenty of reasons to delay plans to refinance a home. One reason has made big headlines. When borrowers face higher interest rates than originally approved for, that is a good reason to wait to refinance.
