July 14, 2015
Are you planning to apply for an FHA home loan soon? There are many credit issues to consider when planning for your mortgage–avoiding new lines of credit before applying, eliminating lines of credit you no longer need or use, checking your FICO scores, etc. But there’s one easy-to-overlook thing all borrowers should do before applying for a new home loan:
Review your payment history on all financial obligations.
It is highly recommended that borrowers have 100% on-time payments on all bills 12 months prior to applying for a new home loan. That 12 month payment record will definitely be scrutinized by your lender and it’s a very important factor in loan approval.
This is true in all cases, but it’s especially relevant for borrowers who have worries that their FICO scores might not be high enough or who have negative credit events on their credit history.
If you have a bankruptcy, foreclosure, short sale or other mark on your credit report that could make the lender question your creditworthiness, making sure your payment history in the last year or more is rock solid is very good for getting you closer to loan approval. The FHA loan rulebook states in very clear language that a borrower’s overall pattern of dealing with financial obligations is a big part in determining whether to approve or deny an FHA mortgage loan.
A single incident of missed payments or even a single incident of a large credit issue isn’t necessarily enough to keep you from getting an FHA loan–but the key is to minimize missed payments or other negative credit actions wherever possible.
Those who have missed payments in the last year may do well to wait the few extra months it might take to get to that 12 month on-time payments mark. Anything less than 12 months of on-time payments, especially for those with other credit issues, and you could face loan rejection rather than approval. Waiting is, for some borrowers, definitely worth the inconvenience.
Do you have questions about FHA home loans? Ask us in the comments section.
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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