March 30, 2022
What can stop your FHA home loan from getting approved? Knowing what the lender will do when confronted with common home loan problems can be half the battle for some.
If you can anticipate the lender’s expectations for things like credit, verifiable income, reliable credit history, and other factors you can get a lot closer to loan approval.
What You Should Know About FHA Home Loan Minimum FICO Scores
Borrowers with FICO scores below 500 are not eligible for an FHA mortgage loan. Borrowers with credit scores above 500 but below 580 may technically qualify but these applicants must put 10% down rather than the lowest down payment possible of 3.5%.
But those numbers are the FHA’s requirements. A participating FHA lender may have additional guidelines or requirements. Expect to shop around for a home loan and be sure to compare lender requirements in this area as they may not all be the same.
Employment Issues That Affect Your FHA Home Loan Application
Do you have less than two years in the job market? If so, your FHA lender may not be able to justify approving the loan unless there is a way to determine that your employment is stable, reliable, and likely to continue.
The factors that affect this determination may include the nature of the employment (highly skilled labor is a plus) and whether the lender can determine that the current employment and income used to justify the loan amount will continue into the future.
Overdrawn Accounts
If you have had issues with overdrafts or insufficient funds in the past, it’s smart to put 12 months between the last incidence of those issues and your loan application. Anything less is likely to hurt your loan approval chances.
Late And/Or Missed Payments
It’s strongly recommended (see above) to come to the mortgage loan application process with 12 months of on-time payments on all financial obligations. Your lender will have a much harder time justifying loan approval with anything less.
New Credit Or New Debt
Never apply for new credit while you are trying to get a home loan approved. Do you know why? If you apply for new credit after applying for your home loan, your lender is required to run your financial information again to make certain you are still able to the loan. If your debt-to-income ratio goes up by too much, your home loan could be in jeopardy.
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: