June 20, 2018
Need some tips on how to get and keep FHA home loan approval for a new purchase loan or a cash-out refinance loan? There are some important credit-related things you can do to avoid making your loan more complicated or have it disapproved entirely.
Do Not Stop Paying Your Credit Card Bills And Rent On Time
Even if your lender has already run your initial credit check, a late or missed payment on your monthly financial commitments can hurt you.
It is never safe to assume your lender will look at your credit reports one time only, and any discrepancies that show up in the meantime will have to be dealt with.
Your lender would, at a minimum, require documentation for the late/missed payment, but the ability for such incidents to derail your mortgage loan application should be given the respect it is due.
Do Not Change Your Credit Card Balances Except To Lower Them
Your lender puts careful work into calculating your debt-to-income ratio. If that ratio changes in the meantime, you won’t be able to safely assume this won’t get picked up on your credit report or that your loan officer won’t find out.
Never add to your existing balances until you have closed the deal and taken possession of the home, even if the plan is to pay off the extra amount on your credit cards or other accounts before the next billing statement. It is far better to pay in cash or by debit card instead.
Avoid Closing Credit Card Accounts Until After Your Loan Has Closed
Did you know that the age of your credit cards and other accounts can be a factor in your credit score? If you begin closing old accounts before your loan has closed, you won’t be certain how that may affect your credit score.
If your FICO scores change your lender may have a decision to make about whether or not to allow the loan to continue, based on circumstances.
Lender standards will play a very important factor in this decision making process, so do not assume that FHA loan rules are the only ones that have a say in what happens if your FICO scores change too much.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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