Identify and Fix Credit Report Errors
Things to Do Before Applying for an FHA Loan
When the Federal Housing Administration announced rule changes to help strengthen finances and protect against risk, one of the biggest changes was requiring a minimum FICO score of 580 to qualify for the attractive 3.5 percent down payment on mortgage loans.
Know Your FICO Score
Applicants who fall below the 580 score will have to put down a 10 percent down payment in order to qualify for an FHA mortgage loan. For many applicants hovering just below that threshold, this policy change may serve as a great opportunity to take close look at their credit report and improve it.
The FICO score is actually comprised of your credit scores from the three national credit bureaus--Experian, TransUnion and Equifax. If your FICO score is just below the FHA limit, you should take the proper steps to check your credit report with the three agencies.
How to Check Your Credit Report
There are many ways people can check their credit scores. There are many online resources for people wishing to identify where they stand with lenders. Once you've gotten your report from the three bureaus, carefully examine your credit history for anything out of the ordinary, such as unauthorized loans taken out in your name, incorrect late payment records or anything that seems questionable, no matter how minor you think it is.
While your credit reports and credit score are what lenders use to judge your reliability in paying back loans, errors in your reports can happen. Make sure they aren't hindering you and your life's plans.
Correct Errors as Soon as Possible
The longer you wait to correct your credit history, the more potential damage errors can do. Prevention is key, so if you don't use a credit monitoring service, you should consider one. If you do find any errors, send a letter to the bureau that reported it and clarify with them why you think it is incorrect. Be sure to provide proof and any other documentation that will help your claim.
If you're already in the process of applying for an FHA loan, notify your lender of your dispute with your credit report as well because your credit score indicates your creditworthiness. It never makes sense to suffer at disadvantages that were the result of something you didn't do.
Helpful Advice - Credit Scores and Loans
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FHA Loan Articles and Mortgage News
May 27, 2020 - Do you want to have a house built for you from the ground up? This is an option, even for first-time home buyers. An FHA One-Time Close construction loan has a 3.5% down payment requirement, which is lower than you may be offered on a conventional loan.
May 26, 2020 - If you want to apply for an FHA mortgage, one of the first things you will learn is that FHA borrowers make a minimum 3.5% down payment, unless required to pay more due to low credit scores. How should you approach the down payment issue?
May 25, 2020 - While it is true that FHA mortgages have more forgiving FICO score requirements, lender standards will also apply and those standards are often higher than the FHA minimums. Improving your credit score is a combination of establishing good habits, avoiding too much credit, and reducing your debt.
May 24, 2020 - If you have been watching the ups and downs of the mortgage market, you will notice that mortgage rates have been falling recently, but market watchers are quick to point out that those with FICO scores below the 700 range are experiencing more costly loans.
May 21, 2020 - There are misconceptions about FHA home loans and refinance loans that hinder some borrowers from making truly informed decisions about their mortgages. What you don’t know can make a big difference in the price you pay, the terms you accept, and more.
