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As a Los Gatos FHA mortgage lender, Mortgage California is working with hundreds of first-time home buyers to achieve their dream of home ownership. We are a local Direct Endorsed lender, which according to HUD  ”makes it easier for home buyers to purchase because they are obtaining their mortgage insurance from a HUD-approved lender.

With lower down payment requirements, more flexible credit and underwriting guidelines, FHA mortgages are designed to expand the many more Americans successfully purchase their first home.

Many people ask me what their first step should be?  At the time this blog entry is being written, we are in a transition period of accelerated changes to all mortgage loan guidelines and credit history and scores is a key factor in obtaining a quick FHA mortgage loan approval and the best financing terms. 

This is an important subject for first time homebuyers, and has the biggest impact on the terms of your loan.  So what are the most important requirements to establish an excellent credit history?

1. A minimum of four credit accounts, which have been seasoned, meaning they are at least two years old.    Lenders look for active trade lines, so charge small amounts each month, and then pay them in full when due.
2. Pay accounts promptly, and avoid carrying a balance. 
3. Do not let accounts go dormant – credit reports will indicate if an account has not been used in the last six months.  A dormant account is not counted as an active trade line when a borrower is being considered for a new extension of credit.
4. Avoid letting utility bills, or medical bills go into collections.  Collection companies are difficult to deal with, and will be more harmful to your current credit score than a late payment on a credit card.
5. Do not open department store credit accounts in exchange for discounts on initial purchases.  These accounts are considered less desirable than regular bank revolving credit cards, because of their more flexible lending guidelines. 
6. Check your credit at least once a year.  You have a right to a free copy of your report from each credit bureau – Experian, Equifax and Transunion.  Check one of them every 4 months, and you will be able to monitor your credit without incurring any expense.  Review each report carefully, and correct any incorrect information right away.  Many times, all you need to do is call their toll free number.  Watch out for any social security number variations – and correct those immediately.  The website to use to access your free credit report is as follows:

Free Annual Credit Report

1. Prevent the three credit bureaus from selling your information for pre-approved credit offers, by opting out of this feature for 5 years.  Be careful they try to get you to choose to opt-in:

Opt Out of Pre-Screened Credit Offers

1. Finally, minimize the number of times that your credit is checked.  Although, this makes up only 10% of your score, it is wise to limit the number of times that it is accessed by a potential creditor.

If you follow the simple steps listed above, you are on your way to establishing a credit history that will generate credit scores in the mid to high 700’s, out of a possible 850.  This is the ideal range of credit scores that will help you obtain the best terms on a mortgage, auto loan or unsecured credit.

Feel to contact an experienced Fha loan officer for a more in-depth analysis of your personal credit history.