Mortgage

How to Increase Your Credit Score for an FHA Loan

fha loans sparta nj can make it possible for you to buy a home, even if you might not qualify for a traditional mortgage loan. The FHA also offers lower interest rates, closing costs and mortgage insurance costs as well as many protections and benefits not provided by the majority of traditional lenders.

Mortgage loans obtained through the FHA are insured by the FHA. This allows lenders to be more flexible, which makes it easier for applicants to meet loan requirements.

Although, it is easier to qualify for an FHA loan, you need to have the minimum required credit score, or higher. Below is a list of the ways you can increase your credit score, before applying for an FHA loan.

If I have credit problems, can I still get an FHA loan?

You should maintain a record of on-time payments for at least one year prior to applying for an FHA loan. See a Consumer Credit Counselor, to help you work through credit issues.

Even, if you have gone through a foreclosure or bankruptcy within the past several years, you still may be able to obtain fha loans kennesaw ga. It is important to present your best possible credit status when applying for an FHA loan.

If you have had a history of payment problems or other credit problems, take the steps explained below to raise your credit rating and to meet other FHA requirements.

What is the minimum credit score for FHA loan?

Applicants with a FICO score under 580 may qualify for an FHA loan, with a down payment of 10 percent. With a credit score of 580 or higher, applicants are qualified to receive the FHA’s low down payment advantage, which means the down payment is only approximately 3.5 percent.

How can I raise my credit score to qualify for an FHA loan?

Presenting your very best credit score helps make sure you will qualify for an FHA loan. In fact, one of the most important things you can do to qualify is to improve your credit rating, before you apply for a home mortgage at the FHA. If you are concerned that your credit score may be low, there are some simple steps you can take to raise your credit score, before you fill out an application for an FHA loan:

Maintain timely payments during the required time period.

When you apply for an FHA loan, a lender will evaluate your credit report. It is important to show that you have maintained a habit of paying payments on time throughout the year prior to applying for an FHA loan.

The lender is looking to determine that credit problems you were having in the past have been resolved and that you have built a record of reliability in making your payments since that time.

If there has not been sufficient improvement, the lender may suggest that you re-apply after taking more time to rebuild your credit rating.

Improve your debt-to-income ratio.

Be sure to bring your amount of debt payments down into an appropriate ratio with your amount of income, before you apply for an FHA loan. Currently (2019), the FHA limit of applicants’ percentage of income spent for debt is 31% for debt related to housing, and 43% for all debts totaled.

However, you should not be discouraged from applying, if your debt is a little higher than the limit. FHA allows exceptions to these ratio limits. Consider paying off a loan that you can afford to eliminate, before you apply for an FHA loan, or get rid of one or two credit cards, to show that you have lower potential debt.

Avoid large credit purchases prior to applying for an FHA loan.

Making a large purchase on credit shortly before applying for an FHA loan, or while the loan process is underway can make your total of expenses appear less clear to a lender.

Debt-to-income ratio calculations factor your existing debts and expenses, compared with your income. Charging a big purchase to your credit card or getting a new loan can significantly alter your application.

Read your credit reports.

Eliminating some debt from your credit record helps your application for an FHA loan. Check your credit report, so you can understand what is impacting your credit score. Obtain your credit reports from each of the three national credit bureaus — Equifax, Experian, and TransUnion.

There is no cost for your credit reports. Identify any miscellaneous balances on accounts you may have overlooked in years past and pay those quickly.

Submit disputes to erroneous debts on your credit report.

Identify errors on your credit reports that may be affecting your credit rating and send written requests to have those corrected. Obtain a resolution in writing for each error from each credit bureau, before you start filling out an application for an FHA loan.

It can take some months to resolve disputes completely. So, begin the process of challenging the errors as soon as possible. Keep copies of all documentation, as evidence to support your request for correction.

Obtain credit, so that you can build a record of prompt payment.

Not having any current loans or credit cards can negatively affect your credit score. The FHA typically requires that applicants for mortgage loans have two open lines of credit, in order to qualify.

If you do not have a credit history showing a sufficient amount of credit activity, you may be able to qualify by submitting a substitute form.

Get financial management help from a professional.

A Credit Counselor can provide you with all the guidance you need to get your finances in order, so that you can qualify for an FHA loan.

Or, if you are unsure about anything regarding your current credit status, ask your lender, a financial planner, or Credit Counselor for advice on meeting FHA requirements.

Make raising your credit score your priority.

The credit rating is one of the most important considerations in determining an applicant’s eligibility for an FHA mortgage loan. Increasing your score as much as possible will help you qualify, and it can help you meet the requirement for a much lower down payment.

So, be sure to follow all the above suggestions, as applicable, for raising your credit score, before you apply for an FHA loan.