If you are new to the home buying process, there are some definite things to do and things NOT to do when preparing for your mortgage. Some of these areas may seem obvious, but you might be surprised at the number of people who don’t give themselves enough planning and saving time ahead of the home loan process.
FHA Loan Tips: DO Start Planning Early
The moment you realize you want to purchase a home using an FHA mortgage, it is time to begin looking at your finances to see how a new budget can be made.
This is because buying a home (no matter what kind of loan you are using) can be an expensive process.
You want to start saving immediately for the down payment, but also for the costs of the loan itself such as the lender’s origination fees, Up Front Mortgage Insurance Premiums, appraisal fees, home inspection, etc.
It is true that some of the associated fees with a home loan may be financed, but this adds to your monthly mortgage payment.
For some borrowers that is not an issue. For others it may be something worth considering. Do you need a lower monthly cost on the FHA mortgage or do you want to save money over the entire lifetime of the mortgage?
It may be advisable to consider paying up front costs to save money later depending on your financial needs and goals.
FHA Mortgage Loan Tips: Don’t Wait To Look At Your Credit Report
It may be intimidating to see your credit reports at first, but in the same way that you should begin saving immediately once you know you want to buy a home, you should also be requesting copies of your credit reports from Experian, TransUnion, and Equifax.
You can get free copies of your credit report (one per year, per agency) so this is the time to request those copies.
Why is it so important to pull credit reports so early? Because any corrections to either your credit score (by way of establishing better credit habits) or to the data in your credit report (due to identity theft, errors, or other problems) will take more time than you realize to fix.
FHA Home Loan Tips: Decide What Kind Of Loan You Need
Some types of mortgages may require more funds. If you need to have your home built from the ground up using an FHA One-Time Close Construction Loan, for example, you may need additional funds for certain expenses such as architectural plans and exhibits where needed.
If you decide to buy a fixer-upper home using an FHA 203(k) rehab loan, you may need more money to do compliance inspections or pest control, asbestos abatement, etc. Know as early as possible how much your chosen FHA mortgage loan might need to be to get the home purchased and the rehab/repair work done.
Some loans (like One Time Close construction loans) may feature higher lender-required credit scores than a new purchase home.
You will need to discuss your home loan needs with a loan officer to find out what may be required depending on the nature of your mortgage.