The FHA home loan program, which is sponsored by the Federal Housing Administration, can be ideal for potential homeowners in the following cases: FHA loans allow for only 3. 5% down and it is possible to use gift funds for the down payment. They also have low mortgage insurance costs and liberal credit requirements.
If you're considering an FHA mortgage, here is a step-by-step overview of the application process:If you're considering an FHA mortgage, here is a step-by-step overview of the application process:
Put Your House in Order It is recommended that one should consider reviewing ones income to determine whether one can afford the mortgage payment as well as other costs associated with owning a house. Check your DTI, credit score, employment history, down payment, and monthly residual income. This will assist you to identify the purchase price and amount of loan you can afford.
Seek Pre-Approval Contact prospective lenders to check the pre-approval of an FHA loan. Lender also evaluates applicant’s income, debts, assets and credit records as a way of assessing their capacity to repay the loan. If the application is successful, you will receive a pre-approval letter stating the maximum amount of credit available. These include; With an FHA pre-approval letter, one is in a position to know the price range of homes that he/she can afford or the amount of money that lenders are willing to offer.
How to Buy Your New Home Having pre-approval will ensure that you begin searching for homes in the range of the pre-approval amount. When you identify a home that fits your budget constraints make an offer with the condition that you will obtain FHA financing in a given period. This safeguards you in the event that the FHA loan application is declined.
Find an FHA-Approved Lender Not all lenders provide the FHA loans so you are required to compare the available options and select the most appropriate FHA lender with the best interest rates. Seek for a lender who is friendly and whose approval requirements are explained in the easiest manner and paperwork needed.
Complete the Loan Application Your lender will offer you documents that you will have to complete to apply for a mortgage loan. Be ready to give many employment details, income, tax returns, bank statements, investment, loans, and many other things. Be very careful not to make any mistakes since even a single one can cost you your approval. Return all forms to the lender by the specified date agreed upon by the lender.
Get Your Home Appraised The lender will arrange for a home appraisal to ensure the value is equal to the amount you intend to borrow. These include features such as size and age of the home, improvements made in the home, sales of similar homes in the vicinity and any other factor that can affect the value of the home. In other words, the value placed on it affects the maximum loan amount even if the property appraises below the asking price.
Allow Time for Underwriting During underwriting, the lenders confirm all details provided in the loan applications. Employment history, income, assets, debts, credit report, property appraisal and all other financial reports are scrutinized by underwriters. Be ready and willing to submit any other document that the underwriter requires without any delay. This appraisal is needed for all FHA loans to ensure they meet the necessary requirements.
Get Home Inspection As underwriting persists, get an independent professional home inspection to discover any issues affecting habitability and safety. In addition to checking the walls, ceilings, doors and windows, the inspector examines the electrical system, plumbing, appliances, roof, foundation, siding, paint, and more. If problems occur, you are free to leave and discuss the problems with the seller.
Await Final Loan Approval The final of them is getting a final approval on the loan after underwriting is completed reviewing your full application file. Repayment periods range from a few weeks to a month and are determined by the specific lenders involved. If approved, you will be provided with a closing disclosure that contains final loan information and costs to set the closing date when documents are signed and home keys are handed over.
The hardest thing when it comes to purchasing a home is to find a financier. When choosing an FHA loan and lender, do not rush and select the one that is best suited for your circumstances. Be sure to get as much information as possible from the lenders you are approaching so that you know what credit score is acceptable, whether there is any possibility of making a down payment, the amount of fees you will be charged and all the procedures that you will have to go through. Knowing how to prepare yourself as a borrower and how to organize your documents can make a big difference towards approval of your dream house.
