Important Considerations When Applying For A FHA Loan

By January 15, 2012
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With interest rates the lowest they have been in generations and property prices stable there are some people who believe now is the best time to buy a home.

If you are buying your home with all cash from your personal savings then congratulations you have achieved quite a milestone. The majority of Americans do not have enough cash to buy the home outright or even to pay the standard twenty (20) percent down payment to secure a conventional loan.

76131969What the majority of prospective home buyers do is apply for a FHA insured mortgage. The FHA is a government entity which insures mortgages from default provided the buyer has met a series of conditions that have been set by the FHA. Banks are willing to provide loans since they have a promise from the government to make them whole should the mortgage default.

Right now the FHA requires that prospective homeowners have a minimum credit score of 580. If you do not know what your credit score is that information can be procured online. Something you should do is request a free copy of your credit report. Inside this report it will detail all credit accounts you have that are not secured. Once you receive a copy of this report you need to look the report over closely for mistakes that could have a negative effect on your credit score.

The law is very clear, if there are mistakes inside your credit report they must be corrected by the credit reporting agency. You must notify the agency in writing about the mistake before they are forced to take action.

After you have cleared up your credit score and it meets the requirements set out by the FHA you need to find a lender who will offer the loan to you. While the FHA insurers the mortgage they do not lend money out to purchase the home. You have the option of either applying through a mortgage bank or reaching out to a licensed mortgage broker who can shop around for you.

By using the services of a mortgage broker you can save time and find out within a matter of hours whether you qualify for a mortgage. What most lenders and the FHA look at is the stability of your income, if you have been employed consistently for at least two years you stand a much better chance of locking down a mortgage than a person who has just started their job.

It is possible to own the home of your dreams sooner than expected thanks to programs like the FHA which help make homeownership possible.