Set Up for Success Before You Begin
Before I started the process, I researched meticulously — or I tried to, at least. I looked into traditional and Federal Housing Authority (FHA)–backed mortgages, finding out the down payment amount and minimum credit score we’d need for each program.
I made sure my credit
scores were above 620, the minimum for the FHA program that I hoped to
use. I paid down credit cards in order to make our debt-to-income ratio
more appealing to lenders. As soon as I met the minimum requirements, I
made an appointment with the bank — and we were sorely disappointed.
First, we learned that
many individual banks have their own requirements on top of the
regulations that the FHA put in place. In my case, the federal program
required a score of 580, but the bank and mortgage agency that we spoke
with required minimum scores of 600 and 620, which can be a significant
difference when you’re working hard to repair credit.
I also learned that
underwriters want to see that your deposit and closing costs have been
in your account for at least two months, to track where the funds have
come from and to confirm your ongoing financial stability. This was a
hindrance to an impatient buyer like me.