September 8, 2015
There has been a lot written about how FHA home loans work, and what it takes to get approved for an FHA mortgage. Knowing what the lender expects from your loan application is one thing, but knowing what could hurt your chances for loan approval can be just as important.
FICO scores are obviously one of the main initial concerns for the lender–you may find lenders who want FICO scores of 620 or higher. But those credit ratings aren’t the only thing that affects that first impression factor.
Coming to the FHA loan process with any late payments on your credit history in the last 12 months is not recommended–anything less than a solid record of on-time payment on all financial obligations for the previous 12 months can hurt your chances to get an FHA loan approved.
Another item in the “don’t” column has to do with your credit–taking out new lines of credit before applying for an FHA home loan is also not a good idea as your lender will be taking a close look at your debt to income ratio. Your new credit card may have a high limit that isn’t being used, but could that potential debt work against you when it’s time to apply? Your lender’s standards may or may not be a factor in that situation.
And that leads to another very important area–cutting down your existing debt prior to applying for the home loan. Your debt-to-income ratio will be examined carefully to make sure you can afford the loan. Cutting the amount of existing debt prior to the loan application is a very good move and can help you become more creditworthy.
If you are in “pre-purchase” mode or in the planning stages of a new home loan application, consider calling the FHA directly at their toll-free number (1-800 CALL FHA) to request a referral to a local, HUD-approved housing counselor in your area who can advise you. Pre-purchase housing counseling is a very useful tool and can help you anticipate potential issues in the days leading up to your loan application.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It’s simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today: http://www.fha.com/fha_loan_limits_widget
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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