One of the most lenient home loans in the market today is the FHA home loan. This is a government-backed loan program by the Federal Housing Administration. Since its launch in 1934, it has made affordable housing available to millions and millions of Americans.
FHA does not plan or build houses, nor does it make loans. Rather, FHA guarantees the lenders in the uneventful case of a loan default.
Homebuyers who are planning to get a house for the first time can take advantage of the FHA loan program. It has one of the most flexible requirements compared to other loans. For this reason, a mortgage insurance is needed. Though the borrower pays more in each month because of the mortgage insurance, it gets reimbursed by FHA once the loan is paid in full.
One important aspect to consider, which is as important as the requirements, are the documents needed to qualify for the loan. Preparing ahead will save you not just time and effort, but also money.
Here are the standard requirements and documents lenders will ask from you in order for you to be pre-approved for the loan.
Employment history includes all pertinent information about your employment for the past two years. This may include your past employers’ names and locations, the positions that you had during those respective employment periods and the income you generated during that two-year period.
You would also need to provide lenders the information about your residence for the past two years up until the present house you are residing in. Were you Renting at some point? Were you living with your parents? or you used to own a home or have you gone through a foreclosure?
This information will help lenders determine what loan programs suit you best. After all, the FHA has helped people to have better housing since 1934 and Americans today are one of the best housed people in the world.
CURRENT EMPLOYMENT INFORMATION
You also need to provide information about your current job. This includes the name and location of your current employer, what position and what kind of job you have, and also, your current monthly salary. They will also be able to determine if your income is stable, or if it is seasonal or a part-time income.
Do you have other income sources aside from the money that comes in from work? This you can also include in your gross monthly income.
Stellar Credit Reports? No problem! FHA offers down payments that are as low as 3.5% for borrowers with FICO scores 580 or higher.
Borrowers with FICO scores lesser than 580, however, need to put down 10% to be able to qualify for the loan. You have to weigh which works best for you. Should you use your funds to finance that 10% down payment or should you use them to make improvements in your credit?
A credit report, as in any other loan, is very important. It is one of the key factors that determine if you qualify for the loan or not.
FHA requires a wide range of information from the borrower in order to process the loan application. This paperwork would be in the form of W-2 forms, personal tax returns for the past 2 years, social security numbers, COE and DD 214 (in case the borrower is a veteran). This paperwork will still greatly impact the approval for the loan.
Since FHA only guarantees the loan, different lenders may have additional requirements that they will ask you. Some may require lesser; some, more. Shopping for FHA approved lenders will you determine which one works best for you and your family. Don’t be afraid to look around. With this guide, we are sure you’ll have your FHA home loan run smoothly.