Higher Credit Helps You Get a Loan
Take Steps to Keep Your Credit Rating High
Homebuyers looking to take advantage of great FHA loan benefits should already know they need to establish the best possible credit rating. Applicants with a better credit rating increase their options for mortgage or refinance loans. In order to qualify for the low 3.5 percent FHA loan down payment, applicants will need a FICO score of at least 580. Those that don't meet that criteria will have to put a down payment of 10 percent on the mortgage they want.
FHA loans are designed to help homebuyers, so these government-insured loans usually come with more lenient requirements than typical mortgages or refinancing terms from traditional lenders. While the benefits don't vary much between someone with good credit and excellent credit, there is a very noticeable margin for those with bad credit and average to good credit.
Why You Need a Better Credit Score
While the 580 FICO score threshold is a major factor in how an applicant will pay for a mortgage, your credit score isn't the only thing the FHA takes into account. Payment history, bankruptcies and foreclosures are also issues that the agency looks at. While these factors may hurt your credit score, they don't necessarily eliminate you from loan eligibility.
That doesn't mean, however, that you can neglect your credit. While the FHA is lenient enough to help those with bad credit ratings, they also require recent credit history to be in good standing.
Extenuating circumstances like job loss, injury or anything else that prevented you to pay in a timely manner can, and most likely will, be taken into account. However, if you have demonstrated you purposely neglected payments or your credit rating, your chances of qualifying for an FHA loan will be reduced.
Be Safe, Not Sorry With Your Credit
Obviously, it's better to have good credit than bad credit when applying for any loan. Don't take your credit history for granted, though, because you might find an error or inaccuracy that could hurt your chances of qualifying for an FHA loan. Instead of going through the headache of disputing your application with your agency and holding up the process, be proactive and make sure your credit score and ratings are where they should be before approaching the FHA.
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FHA Loan Articles and Mortgage News
April 3, 2024 - If you buy a fixer-upper with an FHA loan, you must hire contractors to do the labor. There are some general guidelines about this process all borrowers should know before committing. Don’t consider unlicensed contractors. Your lender can’t approve a loan under such circumstances.
April 2, 2024 - There are lots of finance and mortgage-related publications. Some of these discuss FHA loan guidelines with varying degrees of accuracy. Here are some facts--and corrections--about FHA loans as published by others.
April 1, 2024 - The FHA’s new program launched in 2024 is called the FHA Payment Supplement and allows participating lenders more freedom to (temporarily) change the terms of the loan to reduce monthly payments without changing the home loan interest rate.
April 1, 2024 - When did you last check into your options to buy, build, or refinance using an FHA mortgage? In recent years, the FHA and HUD have modified the FHA single-family home loan program in ways that have benefited borrowers, both new house hunters and experienced borrowers.
March 30, 2024 - As the first quarter of 2024 ends, some market watchers are revising their home loan interest rate predictions for the remainder of the year. There are multiple reasons why mortgage loan interest rates may fall slower than some might like. One of those reasons? Fed lending policy.
