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Getting a preapproval letter from a lender shows that you’re a serious buyer when you’re shopping for a home.
A credit score above 580 and at least two years of steady employment could qualify you for a 3.5% down payment with an FHA loan. But before you schedule the moving truck, you’ll need to know the ins and outs of getting preapproved.
Before you apply for preapproval, make sure you meet the requirements of an FHA loan by providing details about your credit and work history.
Potential lenders will review your ability to pay your down payment and monthly mortgage. Expect to share financial information with lenders.
Plummeting interest rates and financial uncertainty have put banks and lenders on alert. In an effort to avoid lenders defaulting, many banks have raised their minimum credit scores by 100 points, and some have even paused their FHA loan programs altogether. You may find that banks that once offered these government-backed loans are now raising their minimum credit score, tightening employment requirements or requiring a higher down payment.
The time it takes to be preapproved depends on the lender and your application. Online mortgage lenders are typically quicker, often taking a matter of minutes — or a couple of business days through an automated system. However, during the Covid-19 pandemic, borrowers are waiting weeks before approval. If your application is incomplete or if the lender needs more information for verification, it could take longer.
Preapproval letters have an expiration date and are generally valid from 60 to 90 days. To find specific information about the timeline, consult your mortgage company.
If you’re rejected during the FHA loan preapproval process, make sure you met all the criteria or apply to another lender. If your credit score is too low or your debt-to-income ratio is too high, analyze your credit and try giving it a boost. Some lenders will also reject your preapproval if you don’t have the money you need for a down payment.
Getting preapproved for an FHA loan gets you one step closer to purchasing a home. Once you know you qualify for this government-backed loan and gather the paperwork you need, compare lenders that offer FHA loans to get the best rate.
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