Check Your Credit Report Before Applying for a Home Loan
The planning stage is where you research the type of home loan you want (a purchase loan, a rehab loan for fixer-uppers, a fixed rate or adjustable rate mortgage, etc.) and begin saving up for the costs of the mortgage including down payments, appraisal fees, inspection costs, etc.
There is no set time for the planning stages of your new loan but in general you should begin saving and planning a year in advance.
FHA Home Loan Credit Issues
When it is time to check your credit report, if there are any issues you need to deal with such as identity theft, outdated or inaccurate data on your report, etc. you will need plenty of time to address those issues.
You may be required to file police reports, submit supporting documentation, and wait for the credit agency team you’re working with to review and process your complaint.
But that’s not all there is to dealing with credit issues. You may pull your credit report and learn everything is fine on the report except that your credit score itself needs some work. In some cases you may need to lower your credit card balances farther away from the maximum, in others you may need to reduce the overall amount of your outgoing debt compared to your current income.
Putting yourself on the road to a better credit rating takes time and borrowers should be prepared to give themselves as much time as needed to get a better credit score ahead of applying for the new home loan.
FICO Scores Can Affect How Much Your Home Loan Costs
A credit score that is considered by the lender to be marginal or that indicates the FHA home loan applicant might be a higher credit risk can result in being offered interest rates that are higher than they otherwise might be.
Elevated credit risks for the lender may require some kind of compensating factor from the borrower. One such factor is a higher down payment. FHA loan rules state that those with FICO scores between 500 and 579 may technically qualify for an FHA mortgage but at a 10% down payment rather than the lower 3.5% required (by the FHA) for FICO scores at 580 or better.
Your lender may have other standards that are more strict than the FHA FICO score requirements; ask the loan officer what is considered acceptable for maximum financing.
If you don’t check your credit reports, you won’t know about such issues and will be unable to work on them properly. Don’t go into a home loan without knowing what the information in your credit report says about you, doing so may jeopardize your chances at FHA home loan approval.
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
Do you know what's on your credit report?
Learn what your score means.