FHA Mortgages

What You Want To Know About FHA House Mortgage Credit score Checks

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What do first-time home buyers need to know about the credit check process for obtaining an FHA mortgage?

There are many variables, but one thing you can do to get a better understanding of what it takes to get approved for a loan is to try to think like a loan officer – his job depends on it starting to make sure you are at good credit risk.

How can you help the lender?

What you do not know can harm you on the way to buying your first property. Before working with a broker, there are a few things you should know about the credit check process.

Credit is an important part of getting a home loan approval and you want to use your FICO scores, repayment history, and loan utilization to convince your lender that you are ready for a loan.

FHA Rules for Credit Checking for Home Loans

Your lender will need to get your credit reports to approve or decline the mortgage. Your lender will check the following:

  • Payment history
  • Credit limits and how close the borrower is to those limits
  • General patterns of loan use
  • Date of most recent late or missed payments, if applicable
  • FICO results

What else the lender is looking for

Credit scores aren’t the only thing the lender cares about; Your lender needs to verify the following when approving the home loan – this list contains information to help the lender determine if the borrower can make the monthly payments on the mortgage:

  • Debt and Liabilities
  • income
  • financial assets
  • Amount of the adjusted property value
  • Effective income of the borrower
  • Assets / reserves of the borrower
  • Adjusted value
  • Borrower’s total mortgage including principal, interest, taxes and insurance (PITI)

The amount of income versus debt of the borrower and the expected payout of the mortgage loan are important parts of this check to be able to afford the loan.

First-time home buyers: work on your loan early on

Working on your credit doesn’t have to mean paying a third party to “upgrade your credit.” It means paying off all debts on time each time for at least a year or more.

It also means lowering your credit card balances to take them far from the maximum credit limit. Basically, for the best results, you need to keep your debt-to-income ratio as low as possible before applying for the mortgage.

It helps to think like a loan officer when reviewing your credits, debts, and liabilities. Would you approve a home loan yourself if you were a lender? This can be a very helpful question during the planning phase of your home loan.

Find out more about the path to home ownership
Take the guesswork out of buying and owning a home. Once you know where you want to go, we’ll get you there in 9 steps.

Step 1: How Much Can You Afford?
Step 2: Know Your Home Buying Rights
Step 3: basic mortgage terminology
Step 4: buy a mortgage
Step 5: shopping for your home
Step 6: Make an offer to the seller
Step 7: get a home inspection
Step 8: home insurance
Step 9: what to expect upon graduation

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