December 14, 2020
How do you prepare for a home loan in the new year? There are a number of steps you can take to get ready. The first step for some is to contact the FHA and HUD at their toll-free number 1-800 CALL FHA to request a free referral to a HUD-approved, local housing counselor.
This can help you to better understand the credit requirements of the home loan process, learn what areas to focus on to get your credit ready, etc.
The first step for others isn’t to call for a referral, but rather to contact the three major credit reporting agencies to request copies of the borrower’s credit report. You’ll want to get very familiar with the contents of your credit report as early as possible.
Look for a credit monitoring service to help you stay on top of any changes to your report between the planning stage and the loan approval stage–you’ll definitely want a surprise-free application process and that is not guaranteed if you don’t monitor your credit.
Your down payment and closing costs will need to be budgeted and saved for; use a mortgage calculator to help determine what your budget for this might need to be.
You’ll want to determine how much your monthly payments might be, decide how much down payment you want to make based on those calculations (remember that a larger downpayment can result in lower monthly payments depending on how much you put down), and make sure you anticipate expenses like the inspection, appraisal, pest control, mortgage insurance, etc.
Some borrowers start thinking about all this before they have even decided on what kind of home they want to purchase so it’s a very good idea to get a handle on whether you want to build on your own lot with an FHA construction mortgage, buy a condo unit or mobile home, or purchase a multi-unit property.
There are FHA mortgages for all those types of loans, just make sure to ask your participating lender which of those loans they support since not all lenders choose to offer all available FHA mortgage loan types.
There are some things NOT to do in the planning stages; don’t apply for new credit cards, do NOT close old credit accounts after you pay them off, and don’t make a major career change like switching to self-employment income from full-time salary.
Borrowers who do so might not realize that the lender is required to verify the stability of such income (commissions, self-employment income, small business income, etc.) which includes FHA and lender-defined minimum time spent earning that income.
You’ll find at at least two years earning such income is required in some cases before it can be counted as verifiable income.
Yes, some careful planning is required in such cases in order to successfully navigate a career change (of certain types) within a shorter amount of time between the career change and the loan application. Ask a lender about this issue if you are concerned it may apply to you.
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.
Browse by Date: