Enjoy my You Tube video on this subject...not the best lighting since I filmed in our yellow master bedroom but the information is solid advice. http://www.youtube.com/watch?v=ABO0EDsGls4
I also got two relevant things for you to read -- this is a blog excerpt from Bill Zielinski...
The FHA is introducing new guidelines on loan to value ratios and the minimum credit score required for FHA borrowers. As detailed in a Mortgagee Letter from the Department of Housing and Urban Development (HUD), the following credit requirements will apply for FHA borrowers, effective October 4, 2010.
* To be eligible for maximum financing, borrowers will need a minimum credit score of 580 or higher.
* Borrowers with a credit score between 500 and 579 will be limited to a loan to value of 90%. A sub 580 FICO credit score borrower will henceforth need to make a 10% minimum down payment on a purchase transaction.
* All borrowers with a credit score below 500 will not be eligible for FHA-insured mortgage financing.
HUDâ€™s newly introduced minimum credit score and loan to value requirements will apply to all single family loan programs, except for Reverse Mortgages (Home Equity Conversion Mortgages) and Hope for Homeowners.
The new credit requirements are not expected to dramatically change the number of FHA mortgage approvals. Most lenders had already imposed a minimum credit score requirement of 640 or higher for FHA borrowers. In limited cases, borrowers with scores between 620 and 639 could still obtain mortgage approval.
Many potential FHA borrowers with scores below 640 who cannot obtain mortgage approval may be left wondering why this is the case if the FHA has established a minimum score of only 580. The explanation for this is that the FHA does not make mortgage loans but rather insures FHA loans made by lenders. Despite the FHA insurance, banks do not have an iron clad protection from loss.
... rest of that blog at http://seekingalpha.com/article/223956-the-fha-s-new-minimum
And I wrote a 10 part blog called "Top 10 Credit Myths" which is good..
You got some really good answers already! (I especially like Eriks explanation of what pre-qualification is) The only thing I would add is that if you have a small amount to put down, you will probably want to find someone who does FHA loans and that is usually a mortgage broker in my area anyway. The commercial banks are more into strictly traditional 20% down, 80% financed type deals, especially these days!
Find out what you can look for, then find a good caring agent to help you. I just got an accepted contract for a nice young couple buying their first home, after 8 mos of showing them houses. Its allot of work, but well worth it in the end!
Loan officer will provide you if qualified for a loan, amount, downpayment, type of loan and etc.
Real estate agent then works on your behalf submit a sales offer proof you can afford a home.
Most homes require approx. 3.5% or more downpayment purchase any home .
Home owners receive annual tax benefits
A mortgage banker/broker will be able to run your credit, look at your credit score, and give you an idea what amount of money you might be able to borrow.
By analyzing your credit score, your debt to income ratio, your employment history and your down payment abilities, you'll quickly have an idea of your options.
Principal Broker, REALTORÂ®
MacDuff Realty Group