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First-time home buyers need time to prepare their credit, save up for down payment and closing cost expenses, and to find the right lender who can work with their circumstances. Do you know what you should do in the planning stages of your FHA home loan?

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

Planning for a New FHA Loan

June 27, 2019

Planning for a New FHA Loan
First-time home buyers need time to prepare their credit, save up for down payment and closing cost expenses, and to find the right lender who can work with their circumstances. Do you know what you should do in the planning stages of your FHA home loan?

Save Money

Some borrowers want to finance as many of their closing costs as they are allowed but the more you add on to your loan amount, the higher your mortgage payment can become. It’s important to decide early what your biggest priority is-saving money up front or getting the lowest possible mortgage payment.

The FHA Up-Front Mortgage Insurance Premium is a good example of a loan expense that can be financed or paid up front. You should know that this payment cannot be partially financed-it must be paid in full either in cash at closing or by financing it into the loan in its’ entirety.
That is the sort of information first-time home buyers should make a note of and anticipate as an expense in the planning stages. Even if you choose later to finance this cost, the money you save will help you in other areas.

Get Down Payment Help

Your local government agencies or other, private entities may offer down payment assistance, especially for first-time home buyers. Look for these entities and programs early in the planning stages so you know approximately how much help may be available and the dollar amounts (estimated). 

Down payment assistance programs are locally based and are not offered by the lender or the FHA, you will need to research your local community to find them.

Review Your Credit Reports

All consumers are entitled to one free copy of their credit report from the three major credit reporting agencies per year. If you have not yet requested a free credit report from Equifax, Experian, and TransUnion yet, you will want to do so as early as possible to prevent problems later if you need to dispute credit data.

Also, you want to know what your FICO scores currently are since FICO score issues can affect your down payment. Borrowers with marginal credit may be asked to make a higher down payment and you will need to save additional funds in those cases where applicable. 

Don’t assume that your credit information from past reviews or credit applications is the same today-you don’t know if there is evidence of identity theft, erroneous information, or outdated information appearing on the report since the last time you looked.

Also, do some research on how to do your own credit repair rather than paying a third party to do it for you. This is an unnecessary expense that you can easily avoid by paying down high credit card balances and making on-time payments for all financial obligations every time.

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