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FHA Loan Answers About FICO Scores And Credit Requirements

November 17, 2014

101We’ve fielded a variety of questions recently about FHA home loans when it comes to FICO scores and credit requirements. There are several issues to be  aware of when it’s time to start preparing for an FHA mortgage loan, or any kind of major credit application.

One of the first questions you should answer for yourself at the start of your journey to buying a home with an FHA mortgage is, “How much time do I have?” Are you trying to plan for a loan that you want to apply for in a matter of months?

If so, a revision of your timeline may be in order–finance experts recommend taking at least 12 months to plan for a new home loan.

Why? Saving up for closing costs and other expenses can take time, for a start. There’s also the FHA’s required minimum down payment of 3.5% to plan ahead for.

Another reason to give yourself more time to plan for an FHA loan involves your history of on-time payments. We have readers asking us on a regular basis whether a missed payment on an existing mortgage or other financial obligation can hurt the borrower at application time. The answer is, yes–a missed payment in the 12 months leading up to the loan can and does hurt people when they apply for the mortgage loan.

It’s best to be absolutely sure you have a full 12 months of on-time payments on all financial obligations before you apply for the loan. If that means delaying your application, seriously consider doing so until your payment record is ready to withstand the scrutiny of the lender.

Some borrowers want to know about minimum FICO scores for FHA home loans. It’s true that the FHA establishes a lower FICO score for FHA loan eligibility, but your lender is likely to require a higher score. And they are free to do so under the FHA loan rules.

FHA loans depend on lender participation and as long as the higher FICO score requirement is administered according to Fair Housing Laws and is “reasonable and customary”, there is no problem for the lender to have a higher requirement.

Do you have questions about FHA home loans? Ask us in the comments section. All comments/questions are held for moderation.

 

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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