FHA loan is a government-backed mortgage program that is targeted to low to moderate-income borrowers. The homebuying process might be difficult and confusing, especially for most first-time homebuyers. But whether you are still choosing a mortgage program or if you're already set on buying your new home through an FHA loan, this guide is for you. It will help you understand how an FHA loan works and how you can apply for it.
FHA Loan Requirements
Before applying for any type of loan you must be sure that you’re eligible for the program. The eligibility criteria for FHA loans are the following:
- Minimum 3.5% down payment
- A credit score of at least 500
- 10% down payment if your credit score is less than 580
- DTI of 50% or lower
- Loan limit of $331, 760 (As of 2020)
- Only primary residence properties are allowed
Documentations Needed for FHA Loans
Once you’re certain that an FHA loan is for you, start gathering the necessary papers. Most lenders will ask for these documents:
- Pay stubs for the last two months
- Tax returns for the last two years
- W-2 statements for the last two years
- Bank statements for the last two months
- Proof of employment for the same employer for at least two years
Any other documents applicable in your case will be requested by the lender separately.
How to Apply for FHA Loan
- Get Prequalified. It is advisable to get prequalified for a loan first. It will let you know how much you can borrow and what interest rates you’re eligible for.
- Get Preapproved. Once you’re done with the prequalification process and choose the lender with the best loan terms, you can apply for a loan preapproval. Make sure your credit score is in a good state. During a preapproval, the lender verifies all your personal and financial information. Not like in prequalification where you will receive just an estimate based on the information you've provided.
- Shop For a House. Then, you can contact a real estate agent and start shopping for a house. Take your time with this step. The more houses you see and the more sellers you contact, the better.
- Get the House Assessed. Once you find your dream home, it must undergo a professional appraisal and home inspection. This will help your lender decide whether they should lend you the money to buy it.
- Close the Deal. The last step before moving in is closing the deal. Keep in mind that FHA loans allow your seller to pay for the closing costs. You can try discussing this with them beforehand when you make the offer. Then, you can sign the papers, receive the keys, and the house is all yours.
Are you looking for an FHA mortgage?
Now that you know a little more about FHA loans, the next thing to consider is where to find the best lender or the best mortgage deal. Our mortgage brokers can help you with that.
Call us at 813-284-4027
and let us do the hard parts of the homebuying process.