December 13, 2013
A reader asks, “I am a first time home buyer, my score is 618 and I am on Section 8. I am in a home buyer program. Why is it taking so long to become a homeowner? It is all more than a year. (My housing counselor) has me working on my credit report. Now that i got it to 618, she wants me to open some account. Why is that?”
There are many reasons why the home loan process can take so long–especially for borrowers who go though housing counseling programs prior to purchasing. Even without housing counseling, many finance experts recommend taking at least 12 months to prepare for a home loan–any kind of home loan–in order to save money for down payment and closing costs, check credit scores, and insure a least 12 months on-time payments before applying for the mortgage loan.
Taking a year to prepare is a very good idea, especially if there are concerns over credit scores or payment issues. A borrower who needs to contest items on a credit report will find the procedure to contest and/or correct these reports can take months, even in cases where there is no identity theft or similar issues that require police reports and credit agency investigations.
Borrowers who don’t have at least 12 months of on-time payments on their record would do well to take the extra time to prepare in this way–your payment record is one area the lender will definitely scrutinize when you apply for an FHA home loan (or any major line of credit).
The last portion of this reader question is a mystery–why the housing counselor advised the reader to open “some account” isn’t clear–more details about the account would be needed in order to speculate, but if the advice was to open a new line of credit to better establish credit history, the advice may make sense depending on the circumstances and timing of that account.
Borrowers should, in general, beware of applying for new credit (especially major credit) close to the time a new home loan application is about to be submitted–your debt-to-income ratio is very important and should be kept as low as possible when applying for a home loan.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at www.FHA.com, a private company and not a government website.
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.
Browse by Date: