Could an FHA home loan be the perfect way to fund the purchase of your new house? FHA loans are often touted as a good choice for first-time homebuyers, but novice homebuyers are far from the only group that can take advantage of the FHA home loan program. As the Department of Housing and Urban Development makes clear, a wide range of homebuyers and homeowners can utilize FHA loans. Do you know how to apply for an FHA home loan?
How to Apply for an FHA Home Loan
FHA loans come with numerous benefits, including low down payment requirements, low closing costs, and more lenient terms that make it easier for borrowers to qualify (source). If you think an FHA loan could be a good fit for your needs, it’s worth taking a little time to explore how these loans work, what it takes to qualify, and how the approval process works.
How FHA Loans Work
The Federal Housing Administration (FHA) may lend its name to the FHA loan program, but it doesn’t actually lend any money to the people who get these loans. Instead, it guarantees loans provided by FHA-approved lenders that meet the loan program’s requirements. As Investopedia explains, these loans are designed to help low-to-moderate income borrowers become homeowners, and the government backing provides an incentive for lenders to relax the qualifying standards and offer favorable terms like down payment requirements as low as 3.5 percent. As a result, these loans can be a powerful tool for homebuyers.
Qualifying for an FHA Home Loan
The requirements for an FHA home loan are more flexible than those for a conventional loan, but borrowers do have to demonstrate a certain level of fiscal responsibility and meet certain standards. According to the FHA, you must meet the following requirements to qualify for an FHA loan:
- You must be of a legal age to sign a mortgage, possess a valid Social Security number, and be a lawful resident of the U.S.
- You need a steady work history and proof of employment.
- You must intend for the property to be your primary residence.
- You must have a down payment of at least 3.5 percent if your credit score is 580 or more.
- You must have a down payment of at least 10 percent if your credit score is between 500 and 579.
- You should have a debt-to-income ratio of less than 43 percent.
- You must have the property appraised by an FHA-approved appraiser, and it must meet certain minimum standards.
The Approval Process
Once you locate an FHA-approved lender with whom you want to work, it’s time to begin the approval process. According to the FHA Handbook, you’ll need to complete the following steps to get approved for an FHA loan:
- Preapproval: Although preapproval is technically optional, it’s a good starting point because it allows you to verify your eligibility and find out how much you’ll be able to borrow. Why should you take this step before you begin shopping for a house? In addition to helping you identify your price range, getting preapproved means that you’ll be given a pre-approval letter, which can help convince sellers that you’re a serious buyer.
- Application: Ready to learn how to apply for an FHA home loan? Start by filling out a Uniform Residential Loan Application. It’s a thorough form with questions about topics like your income, employment, expenses, recurring debts, and other personal data. It also asks about the type of loan that you are seeking and the address of the property that you hope to purchase.
- Appraisal: An appraiser hired by your lender will inspect the property and provide an estimate of its value. For the loan process to continue smoothly, this estimate must be within the scope of the requested mortgage amount.
- Underwriting: At this stage, the lender’s underwriter evaluates your application to determine if everything is in order. It’s not unusual for borrowers to get requests for additional information or documentation during this stage of the process.
- Approval: Once the underwriting is completed satisfactorily, the loan is approved. You’re ready to move forward with your home purchase.
Do you understand how to apply for an FHA home loan? Whether you still have questions or are ready to begin the approval process, turn to the trusted team at PrimeLending of Springfield, Missouri. Our team of home loan experts focuses on making every step of the home-buying process simple, transparent, and rewarding. With our expertise and commitment to clear and timely communication, we can guide you through the mortgage process from application to closing. To get started, please call 417-616-0777 or contact us online. We look forward to hearing from you!
