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.
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FHA Loan Articles and Mortgage News
June 21, 2022 - FHA loans aren’t just for existing construction houses. There are also low down payment FHA loans that can help you build or renovate a home. An FHA One-Time Close mortgage is an option to consider, with its low 3.5% down payment requirement.
June 13, 2022 - Home equity is the difference between the current market value of the home and the amount you still owe on the mortgage. But that market value is subject to change depending on supply and demand, interest rates, and other factors.
June 10, 2022 - When you buy a home with an FHA mortgage, you will choose between a fixed-rate mortgage where the payments stay the same for the duration of the loan term and an adjustable-rate mortgage where the rates may change after a certain period of time.
June 8, 2022 - If you apply for an FHA home loan, you may be required to use an escrow account for certain aspects of the transaction including a place to deposit earnest money before the deal closes. You may also be required to use escrow to pay your property taxes each year.
June 4, 2022 - Why can’t a home buyer put their trust in the appraisal alone? Why should you budget and pay for the optional home inspection? Inspections are only as optional as taking a used car for a test drive before agreeing to buy it.
