Special loans are offered by the Federal Housing Administration to help families who do not qualify for conventional loans purchase housing.The loans are insured by the federal government.When compared to other types of mortgages, an FHA loan is especially affordable and easy to qualify for, making it a great choice for people and families who have a limited budget.
Step 1: You have to make sure you qualify for the loan.
Even though they have less requirements than conventional home loans, they still have requirements.To qualify, you must be able to meet most of the standards.You can still be approved for a loan even if you don't meet one of these standards.If you have had 2 years of steady employment in the same line of work, your income has not changed.If you have less than two 30-day late payments in the last 12 months, one 60 day late payment, or one 90 day Late Payment, you should have a credit score of 620 or higher.The minimum credit score required by the Federal Housing Administration to insure a loan can be as low as 500 if you have 10 percent down or more.If you had a foreclosure in the past 3 years, your discharge date cannot be within two years.You may have to wait longer if the foreclosure was on a HUD loan.If you have, you won't be able to get an FHA loan.The loans are only available for primary residence.You have to live in the property you're buying.The minimum down payment is usually 3.5% of the purchase price, and you must have the cash to pay it.
Step 2: You can meet with a mortgage lender or broker.
Only those approved by the federal government can offer these loans.You can find a mortgage broker authorized to make FHA loans near you.You can use the HUD website to find a mortgage lender near you.
Step 3: Save money for the down payment.
A down payment is a percentage of the purchase price paid up front.Small down payments are not an exception to the rule.3.5 percent of a home's cost is what you can expect to pay if you get an FHA loan.You can't get a loan without making a lump-sum payment.You can ask a family member to make the payment on your behalf if they write a note stating that this is a gift and not a loan.The upfront portion of the mortgage insurance premium can be financed if you pay as part of your loan.The mortgage insurance premium can't be financed.
Step 4: There are documents to be supplied.
To apply for a loan, you'll need to provide the lender with documents that prove your employment status, savings, credit and personal information.You'll need a lot of documentation, including job records, tax documents, and personal information.You should be prepared with the addresses of the locations you've lived in the last two years.The amount of your gross monthly salary as well as your employers' addresses and names for the last two years.Valid W2 forms have been submitted for the past two years.The forms were submitted for the past two years.
Step 5: You need to complete a loan application.
The correct application documents for your loan will be provided by your lender.The application should be filled out as thoroughly as possible.Look up information if you don't know it.Lying on federal documents is a crime.You should get pre-approved for the loan.If your credit history is in good shape, you're more likely to get pre-approved.Before you fill out the application, you should look at the document to make sure you understand all the questions.The application can be found online.
Step 6: It's a good idea to have the property assessed.
If the property you want to buy doesn't pass a proper appraisal and inspection, you can still be denied a loan even if your application is accepted.The lender or broker must order the appraisal for the borrowers.The appraisal can't be ordered by the borrower.To make sure the property complies with health and safety regulations.The property's value is determined by the value of similar homes in the area.
Step 7: Signing the closing papers is necessary to complete the transaction.
Before you sign the final paperwork, be sure to read everything.If you don't understand something, ask for clarification.3.5 to 4% of the purchase price is the closing costs.The closing costs include attorney's fees, the fee for the property appraisal, title examination and insurance, prepayment interest, property taxes and others.You'll need the money for these costs on top of your down payment if you're budgeting for a loan.The origination fee is likely to be 1 percent or more of the loan value.If they charge more, negotiate the terms down to 1 percent, less than 1 or choose a different lender.You have to shop around to find the best rate.Some may not charge an origination fee.
Step 8: Know the pros and cons of a loan.
There are a variety of advantages, but they aren't for everyone.Before you apply for an FHA loan, make sure you understand how the loan differs from normal loans.A general rule is that it is easier to obtain an FHA loan than an average home loan.Depending on your situation, you may still be able to get a loan even if you have a foreclosure or a repossession in your credit history.The 3.5% of the purchase price is more than the 3 to 5% required for most loans other than USDA loans.If you sell your home, the buyer can assume your loan payments.You have to wait several years after a foreclosure before you can get another loan.The house must pass a special inspection and appraisal process in order to get an FHA loan.There are two kinds of mortgage insurance premiums that you have to pay.The MIP is the upfront mortgage insurance premium.The credit score doesn't affect the premium, which is 1.75% of the home loan.This can be paid in a lump sum or in mortgage payments.There is a monthly MIP.You pay this premium into your mortgage payments.The loan-to-value ratio, the size of your loan, and the time it takes to pay off the loan are some of the criteria.
Step 9: Determine if you can afford mortgage payments.
You need to give your monthly income to the lender.Student loans, credit card debts, etc., will be investigated by the lender.If the monthly payment on the loan requires too high a percentage of your income, you won't be able to get a loan.With special justification, you may be able to get approved for a front-end ratio of up to 47% if your monthly housing expenses are less than 31%.The debt to income ratio has to be less than 45%.In certain circumstances, you may be approved for a back-end ratio.
Step 10: Ask for help.
Still not sure?Don't make a decision before you understand what you're getting into.Depending on your situation, a professional will be able to help you decide whether an FHA loan is appropriate.In order to help you make informed decisions about housing, loans, and personal credit, the U.S. Department of Housing and Urban Development sponsors housing counseling agencies throughout the country.The HUD website has a locator for housing counseling agencies.The Housing and Urban Development has a housing counseling hotline.