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
February 7, 2020 - FHA home loan rules for second homes and investment properties are fairly straightforward; it’s the exceptions that can be confusing. Basically, if you want an FHA mortgage, you must be prepared to occupy the property you buy with one.
February 2, 2020 - What do you need to know about interest rates in 2020? Your credit score helps the lender decide what interest rate to offer you. So in addition to the market forces that change and effect the home loan rates on a daily basis, so does your own credit history.
January 31, 2020 - Buying a home instead of renting it means doing some financial housekeeping to get started. Don’t forget to review FICO scores and credit reports and payment history to make sure you have made on-time payments for the 12 months leading up to the loan application.
January 29, 2020 - Those refinancing this year will need to review their credit reports, make sure they have no late or missed payments in the year leading up to the loan application, and work hard to reduce debt and credit card use. Take some of the same steps you took when you originally applied.
January 25, 2020 - The FHA down payment can be as low as 3.5% of the adjusted value of the home. Compare that to the conventional loan 20% down requirement and it’s easy to see why FHA loans might be more appealing. Smaller down payments make sense if you don’t plan to keep the home long-term.
