There are certain mortgage loan programs that are often considered ideal for first-time homebuyers as they hit the market, and the FHA loan program is one of the chief examples. Backed by the Federal Housing Administration and featuring things like low down payment requirements and flexible credit score thresholds, FHA loans are regularly put to use by people purchasing their first home.
At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to provide a number of mortgage loan programs that are ideal for first-time homebuyers in West Jordan and other parts of Utah, including FHA home loan options and many others. While it’s true that these programs offer more flexible qualification thresholds in their applications that often make them ideal for first-timers, this doesn’t simply mean everyone will be approved – and there are some things you can do to improve your chances. Here are some basics to keep in mind.
Know the Basic Qualification Requirements
First and foremost, make sure you know what the basic qualification requirements for your loan type are. While low down payment options and flexible credit score thresholds may be available, there are still going to be rules in place regarding income, debt ratios and other key factors that will need to be taken into account. It’s important to familiarize yourself with these as much as possible before you apply for a loan.
For instance, a credit score of at least 580 will usually be required for an FHA loan, and you will need to show some evidence of income. You should take the time to review these requirements in depth and make sure that you meet them all before applying.
Take Steps to Improve Your Credit Score
Your credit score is one of the biggest factors affecting your ability to get a mortgage loan, so it’s important to take steps to improve it if you can. Start by getting your credit report and looking for errors, which could be hurting your score without you even realizing it. If there are any errors, make sure to dispute them with the relevant organization and try to get them corrected.
Beyond that, there are other steps you can take as well. Pay down any outstanding debts and make sure your credit utilization ratio is as low as possible. Also, avoid opening up any new lines of credit in the months leading up to your loan application – this could have a negative impact on your score.
Do Your Best to Optimize Debt-to-Income Ratio (DTI)
Another key factor in any mortgage loan application is your debt-to-income ratio, or DTI. This will take into account all of your outstanding debts (including credit cards and other types of loans) and compare them to your income. The lower you can bring this ratio down, the better it will be for qualifying for a loan – so look for ways to optimize it.
You may need to pay down some of your existing debts or find other ways to increase your income. This can take some time and effort, but it could make a huge difference when you apply for a loan – so it’s worth taking the time necessary to do this properly.
3.5% Can Still Be a Big Number – Save Up for a Down Payment!
Some people look at the 3.5% down payment requirement for FHA loans and think that it’s not a big deal – but 3.5% of the total purchase price of your home can still be a significant amount of money, so make sure you are saving up for it if you plan to use an FHA loan in your purchase. Start putting away money as soon as possible and make sure you have your full down payment amount ready when you need it.
Maintain Your Job and Income
If at all possible within the period of your FHA loan application, try to avoid any major job changes or significant income reductions. This could harm your ability to qualify for a loan, so even if you are in the process of seeking new employment or changing jobs, make sure to maintain your current income and job situation throughout the application process.
If a job change is unavoidable for some reason, such as a move to a different city, make sure you can still show proof of income and job stability throughout the loan application period.
Avoid Any Bankruptcies or Foreclosures
One tip that virtually any mortgage applicant should follow is to avoid any bankruptcies or foreclosures during the loan application process. This can be a major red flag for lenders and will likely harm your chances of being approved for a loan. If you have experienced either of these types of issues in the past, make sure you are able to demonstrate that it won’t be an issue going forward.
By following these tips, you can give yourself a better chance of being approved for an FHA loan when you apply. Make sure to do your due diligence and be as prepared as possible before submitting your application, and you should have a much higher success rate. Good luck!
For more here, or to learn about any of our West Jordan mortgage loan programs or services, speak to our team at Altius Mortgage today.