Why rent a home if you could just buy one that you can own? If you’re not considering it because you’re having trouble financially, you can apply for FHA loans. In this article, we will tell you everything you need to know about FHA loans so that you can have a higher chance to get approved and purchase the first home that you can call your own.
Let’s get to it!
What Is an FHA Loan?
First, let’s define what an FHA loan is. The FHA in FHA loans stands for Federal Housing Administration. It is a mortgage insured by the FHA and issued by an FHA-approved lender. The good thing about FHA loans is that they are designed for low-to-moderate-income borrowers. You don’t have to worry that much because this type of loan only requires a lower minimum down payment and lower credit scores than many conventional loans do.
How to Get Approved for FHA Loans?
While you can benefit from a lower minimum down payment and lower credit scores requirement, it doesn’t mean that you can get approved right away. There’s a higher chance that you can get approved for FHA loans if you pay all your financial obligations on time. In fact, most lenders recommend that borrowers of FHA loans should come to the application process with a minimum of 12 months of on-time payments on all financial obligations, especially on payments for rent or a prior mortgage.
If you have a delinquent rent or mortgage payment in your credit score within the 12 months leading up to your loan, there’s a higher chance that your lender will process your mortgage application differently.
What Will Happen If You Have Credit Score Issues?
If you apply for an FHA loan and your lender sees that you have credit score problems like low credit scores, a patchy payment history, or other financial issues that can pull your credit scores, you will be placed in a manual underwriting process. A manual underwriting process simply means that the lender will manually verify and review your application data where appropriate. It doesn’t mean that your application will be automatically denied; the lender will just weigh if the issue will not result in financial negligence and that the problem is unlikely to happen again.
What If You Have Good Credit Score and Records?
If you have a good credit score and record, then your application will be placed in automatic underwriting. Automatic underwriting, on the other hand, will allow you to have a problem-free and smooth process. Your application will be processed automatically, and there’s no need for your lender to verify your application data.
For a higher chance to get approved on your FHA loan application, you should work your way to being placed in automatic underwriting. You can do that by improving your credit and payment history long before you apply for the loan.
Even if your income is low, you can still own a house by applying for an FHA loan. You just need to show your lender that you have a good payment history for a higher chance of getting approved. Now that you know more about FHA loans, you can now have an opportunity to purchase a house that you can call your own.
If you’re looking for the best mortgage lenders in Sacramento, Hawkins Home Loans is what you’re searching for! We understand that there is no one-size-fits-all home loan, so we find the financing that will work best for you. Our company offers different home loan programs, including fixed loan rates, adjustable-rate loans, FHA loans, and more. Get in touch with us today to know how we can help you!