August 25, 2021
Credit issues are among the biggest worries for many FHA loan applicants. Are you concerned that you aren’t fully prepared for a home loan application? If you tackle home loan issues early enough, you can get much closer to home loan approval.
We regularly encourage readers to check their credit scores, read and monitor their credit reports, and be extra-vigilant about checking those credit reports all the way until the loan closes.
One of the reasons why we do that?
Your lender will not check your credit ONCE during the home loan process–your credit may be reviewed multiple times.
And that is one very good reason to keep checking your credit reports, too.
And while we’re talking about credit reports, why not take some advice from the very agencies responsible for reporting your credit information? TransUnion is one of those agencies–what advice does this company have for those who want to apply for a home loan?
A quick look at the official site reveals some excellent, common-sense type home loan preparation advice including this crucial tip:
“Your credit score directly affects the interest rate on your mortgage. Basically, high credit scores lower your interest rates, while low scores cause them to rise.” So what does TransUnion say to do if your credit scores are good but you still need a more competitive interest rate?
According to TransUnion, “If you can afford higher monthly payments, then opting for a shorter loan—a 15-year instead of a 30-year loan—can help reduce your interest rate. Short-term loans cost banks less money. In appreciation, your bank might reward you with an interest rate as much as one percent lower than that of a long-term loan.”
It is true that not all home loan applicants can afford the monthly mortgage payments that a 15-year mortgage might require. But for those who can afford to do so and have the goal of saving more money over the full loan term, the shorter loan is worth the investment.
And what about saving money on closing costs? Anyone motivated to apply for a 15-year FHA home loan will be interested in the following advice from the TransUnion official site:
“Closing costs often run between two to three percent of your total loan. Other fees include the loan origination fee, the loan application fee, the title services fee and appraisal fee.”
“Additionally, you might consider setting up an escrow account, which guarantees 12 months of property taxes and homeowner’s insurance.”
All of those costs add up, but fortunately, there is the ability for the seller and buyer to negotiate a seller contribution toward closing costs (never the down payment, which is not permitted).
The seller is allowed to contribute up to six percent of the asking price toward these costs.
Any amount above this results in a dollar-for-dollar reduction in the home loan amount. But a seller contribution could help you save even more money on the mortgage.
Learn About the Path to Homeownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.
Step 1: How Much Can You Afford?
Step 2: Know Your Homebuyer Rights
Step 3: Basic Mortgage Terminology
Step 4: Shopping for a Mortgage
Step 5: Shopping for Your Home
Step 6: Making an Offer to the Seller
Step 7: Getting a Home Inspection
Step 8: Homeowner’s Insurance
Step 9: What to Expect at Closing
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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