What You Need to Know About Home Loan Approval
Not All Lenders Have the Same Requirements
Your loan officer may or may not be willing to work with you at your existing credit score. What FICO scores are generally needed to be approved for a home loan? FHA loan standards are more forgiving, but the lender’s requirements may be higher than the FHA minimums.
If your FICO score is in the 500 range, you should definitely take steps to improve your credit score before applying. This is also true for those with FICO scores in ranges lower than 650. Every little bit helps.
How to Improve Your Credit Score
- Work on your payment habits and don’t apply for the mortgage until you can make 12 consecutive months of on-time payments on all your bills every single time.
- Don’t apply for new credit in the year leading up to your mortgage loan.
- Lower your credit card balances to well below the halfway mark to your credit limit.
Some FHA loans may be easier to get than others. An FHA Construction Loan, also known as an FHA One-Time Close Construction Mortgage, may require higher FICO scores than a mobile home loan.
This will depend greatly on lender standards as FHA minimums are generally the same no matter which kind of new purchase loan you seek.
Some FHA Home Loans May not Be Right for Your Needs
There are borrowers who want to buy, and there are borrowers who want to buy and repair. Still other borrowers want to refinance to repair a home. The kind of mortgage you need will depend greatly on such factors. Do you need a straightforward home loan with a low down payment, few add-ons, and a fixed interest rate?
Or do you plan to sell the home in a few years and move up to a new mortgage on a bigger home? In such cases an adjustable rate mortgage may be for you depending on your financial strategy. It’s best not to apply for an Adjustable Rate FHA Mortgage without a plan on how to deal with the loan once the introductory interest rate period ends.
Talk to a loan officer about your home loan needs, FICO score requirements, and other factors. Remember that it’s best to shop around for a lender so you can get competitive rates and terms; the lender who doesn’t want to work with you and your FICO scores may lose out to a lender who can work with you in your current circumstances.
There's a Difference Between APR and Interest Rates
Choose Your Mortgage Lender Carefully
Getting Started With Your FHA Loan Application
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