June 17, 2019
Do you know how to prepare your finances for a home loan application? There are several areas you should pay attention to before applying for an FHA home loan to buy real estate, and the are all equally important for loan approval.
How To Prepare Your Credit Cards For A Home Loan Application
Reduce your credit card balances as much as possible before applying for your home loan. Ideally your initial goals should be to get the balances below 50% of your credit limit, but your goal should also definitely include 100% on-time payments for a full year before you fill out a home loan application.
How To Prepare Your Student Loans For A Home Loan Application
You will, as a first-time home buyer or repeat borrower, hear again and again about the importance of a full year of on-time payments on all financial obligations.
But with student loans, you will also need to make sure you do not have any delinquency or outstanding debt in the form of missed payments before applying for an FHA mortgage loan or any other kind of major credit line.
If you come to the home loan application process with a delinquency, your chances of loan approval are seriously affected.
Make sure you have no delinquency on your student loans, and if you do have delinquency issues you will be required to have made payment arrangements satisfactory to the lender AND a minimum amount of on-time payments following that arrangement.
Borrowers are generally not allowed to pre-pay that minimum number of payments to avoid having to wait out the actual amount of calendar days required-you must be in the payment plan for the actual minimum number of months specified by the FHA and the lender.
You may be required to make three months of payments on the repayment plan before you will be allowed to apply for a mortgage loan.
How To Prepare Your Savings Account For An FHA Mortgage
You will need to save up for the minimum 3.5% down payment required of all FHA new purchase loans, as well as pay for any closing costs related to new purchase or refinance loan transactions.
You should also save to prepare for fees related to the loan such as a title search, pest abatement, flood zone determination, hazard insurance, and the FHA Up-Front Mortgage Insurance Premium.
Saving is a very important part of the home buyer’s preparations. Even if you know you will receive down payment assistance or have the seller contribute some funds toward closing costs, the bulk of the financial responsibility for your closing costs is…you.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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