Buying your first home can be a nerve-wracking experience, especially if you don’t have the finance for you. But you don’t need to worry, as the FHA is there to finance your home. The Federal Housing Administration insured the FHA loans while the lenders approve it. And the benefits of this loan are that you can get the approval with as low as a 500 credit score and 3.5% down payment.
But you have to be careful when looking for an FHA loan 500 credit score Texas, as making mistakes can prevent you from realizing your dream. Here we have listed down a few mistakes that you should avoid –
Not keeping eye on your credit
If your credit score and you have credit issues, such as debt collection actions, history of late payments, significant debt, or credit card mistakes – mortgage lenders might ask for higher interest rates and terms. Besides, they can deny your home loan application. Either of the situations is frustrating and can prevent you from realizing your dream of homeownership. In order to tackle the potential problems in advance, check your credit report each year. Look for errors that are affecting your credit score and work on correcting these. Besides, pay your bills on time and make more than the minimum monthly payments to boost your credit score.
Opening or closing lines of credit
You can still be denied a home loan even after being pre-approved for one. Mortgage lenders check your credit during pre-approval and again just before closing before giving you the final approval. In between, try to maintain the status quo in your credit and finances. It means you should not open new lines of credit or close existing lines of credit. Doing so can lower your credit score and increase your debt-to-income ratio – both are key reasons for a lender to deny a home loan approval.
Making big purchases on credit
Just as opening or closing lines of credit can affect your score, so can running up existing accounts. Moreover, keep your credit and finances stable until you close on your house. Use cash instead of or, better yet, delay buying new things until after closing. Additionally, you want to get a sense of how your budget will handle your new homeownership costs. You can wait a few months before adding more monthly payments for big purchases to the mix.
By changing jobs may benefit your career, but it may complicate your mortgage approval. When a lender is approve your loan application irrespective of having a low credit score, he or she wants to ensure you have stable income and employment. Besides, he or she wants to make sure that you can afford to repay your mortgage. If you were preapproved for a mortgage based on a certain income and job, any chances in the intervening before closing can be a red flag and delay your closing. So, try not to change your job until your loan closes.
Though these mistakes seem common, these can create roadblock and prevent you from getting an FHA loan approval with a 500 credit score. So, be careful and avoid these mistakes.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.