April 24, 2017
Are you ready to apply for an FHA mortgage in 2017? There are several areas that borrowers should spend plenty of time examining before filling out paperwork or online forms to apply or get pre-approved for a mortgage loan.
Credit Reports
If you do not know what your lender will see when she pulls your credit report, there’s a good chance you are not ready to fill out FHA loan paperwork. Why? Because if there are errors on your report, questions over certain accounts that may need to be disputed or contested, evidence of identity theft, those will all need to be dealt with before you apply for your loan.
A lender can work with a borrower who has disputed accounts still pending (assuming the lender’s standards permit) but if you learn about identity theft issues or errors on your report after applying for the loan, your chances at FHA mortgage loan approval are potentially lower.
On-Time Payments
Borrowers should expect to come to the home loan application process with 12 full months of on-time payments on all financial obligations. Doing anything less can jeopardize your chances at loan approval. Remember, the lender wants to find evidence that you are a good credit risk. The lender wants to approve your application, but will have a harder time justifying the loan if there are lates/missed payments within the last year.
Down Payment
Have you given yourself enough time to save up for a down payment on your FHA home loan? A minimum 3.5% down is required and there are no FHA loan provisions for a “zero money down” loan. The down payment is a critical part of your FHA loan, don’t come to the application process without having your down payment saved or having lined up sources of down payment gift funds where permitted.
Remember, FHA mortgage loan down payment rules say you cannot use unapproved sources for the down payment. Borrowers cannot use credit card cash advances, payday loans, or other types of “non-collateralized loans” to make the down payment. The lender will be required to verify the sources of all down payment funds including cash saved at home, savings accounts, family member contributions, etc.
Closing Costs
Closing costs are another important area to prepare for. Some borrowers save up for closing costs, others plan a budget that will factor in these costs. Some closing costs may be included in the loan amount, and others may be paid by the seller (up to six percent of the sale price of the home). Remember, closing costs are not the same as your down payment and your closing costs cannot be used to meet the down payment requirement.
FHA loan rules, state law, and lender standards will all apply for situations involving issues or questions about any or all of the above. It’s best to ask your loan officer if you aren’t sure about how FHA loan rules or lender standards may apply in a given situation. FHA loan rules provide minimum standards, but often state law and other rules apply in addition to the guidelines in HUD 4000.1.
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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