FHA Home Loans: Improve Your Approval Chances
What can help a borrower’s chances when it’s time for the lender to decide whether to approve or turn down your FHA loan application?
Bigger Down Payment
FHA loans allow a larger down payment to compensate for lower FICO scores. Saving extra for your down payment in the planning and saving phase of your loan is a smart move. Remember that lender standards will also factor into the FICO score/down payment issue.
Longer Job History if You Are New to the Job Market
This won’t apply to all borrowers, but those new to the job market should ensure they have at least 24 months of on-the-job history before applying for a home loan.
Longer Job History After Switching Careers
If you have had a major career change, such as starting your own business, going freelance after being a salaried employee, or you change from salary to commission income, you’ll want to have at least 24 months in your new job or the new version of your job before applying for best results.
Taking Extra Time to Pay Down Your Debts
Your debt ratio is a very important factor in loan approval. Are your monthly debts eating more than 40% of your monthly income? More than 50%?
Take some extra time to whittle down your monthly debts before applying since your lender’s job is ensuring you can realistically afford your loan. The amount of debt you carry informs the lender’s decision in part to approve or deny your application.
Don’t Apply for More Loan Than You Can Afford
It’s a smart move to use a mortgage calculator to determine what you might be able to realistically afford for a mortgage loan and start making a mortgage budget as early as possible in the planning stages. Why?
You’ll need time to get used to this large new financial obligation. Those numbers look intimidating at first, but if you do your calculations and set realistic expectations, over time, you’ll see how you can afford the loan and under what circumstances.
One common factor in much of the above advice is time. Don’t hurry through the mortgage planning and saving process if you can help it. The time you spend preparing will pay off later on when you are ready to fill out your home loan application.
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