November 21, 2023
First-time homebuyers are often encouraged to start planning and saving for an FHA loan at least 12 months ahead. And it’s good advice.
Within those 12 months, you’ll want to concentrate on a few important areas. There are moves to make and moves to avoid in the 12 months before your home loan application. 12 months is just a baseline. Some prefer to take 18 months or longer to prepare for a mortgage application.
Take as much time as you need for best results.
Don’t Make Big Career Changes Too Close To Application Time
For the purposes of this article, pay raises, promotions, or other upwardly mobile moves within the company you currently work for are not the issue.
Switching to a freelance career, transitioning from full-time to contract work, or starting your own business are the issues we focus on here.
Such significant career changes may make your lender reconsider your loan application until you have had enough time in the new job to prove your new income is likely to continue.
Your lender typically needs at least two years (24 months) as a self-employed worker. The same may apply for new freelancers and new contractors.
Don’t Take On New Debt
The goal within the 12-month planning window you’re using for your home loan should be to lower your debt, not add to it.
The debt you carry ahead of your home loan application is an important factor. Your lender will pay close attention to your debt-to-income ratio. Get it as low as you can before you apply.
Don’t Apply Right Away If You’re New To The Job Market
Do you just graduate from college? If you are experiencing the full-time job market for the very first time, you may need to wait up to 24 months before you apply for an FHA mortgage.
All the reasons listed above are relevant here, including time on the job, income deemed by the lender to be likely to continue, and that your current job is stable.
There may be certain exceptions for those who have degrees or training for highly skilled work. Doctors, lawyers, or pilots may have an advantage in this situation. Different requirements may apply in such cases, but lender standards also apply.
Be sure to ask the lender about this issue if you have questions. Don’t forget that before you start saving or making plans, you always have the option to call a participating FHA lender to ask questions.
How long does your participating lender ask you to be on the job before you may qualify for an FHA loan? Ask about those standards and what the lender offers in advice in such cases.
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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