FHA Loan Applications
Pre-approval is not the same as loan approval and you will need to discuss that nuance with your loan officer before house hunting.
What do you need to successfully apply for a home loan?
- Proof of employment
- Proof of income
- Tax records (at least two years depending on circumstances)
- FICO® scores of at least 580 to qualify for the lowest 3.5% down payment
- FICO® scores between 500 and 579 for a 10% down payment
- Debt-to-Income Ratio < 43%.
- A specific property to buy with the loan proceeds
Some home loans are not available from some lenders; you may find one lender offers mobile home loans and another does not; ditto for construction loans, rehab loans, or any other FHA loan product.
Applying for a home loan implies several things. When you pre-qualify, you have not likely found a house you specifically want to buy yet. Pre-qualifying shows the seller you are serious, but it is not a lender’s agreement to extend credit.
That comes when you formally apply for the FHA home loan and submit tax records, W2s, bank statements, give the lender permission to access your credit reports, etc.
When you get pre-approved for a mortgage, you can shop for a home with confidence; when you get approved for the actual loan you are committing to a purchase agreement or sales contract, setting a closing date, and agreeing to buy the property in writing.
An FHA Loan application can be denied if you don’t have enough work experience (two years minimum is typically required), if you don’t have FICO® scores that meet FHA minimums, And the home itself could be an issue when it comes to loan approval.
A house that is appraised may require corrections but still be approved for a mortgage loan, but the corrections would be required as a condition of loan approval.
Dave Ramsey wrote an article called, “5 Steps to Buying a Home That Won't Bust Your Budget” but one tip you won’t find in that article? Ramsey lists some common-sense advice including knowing your home buying expenses, adjusting your investing and charitable giving to make anew budget, and understanding your home buying expenses. But choosing the right kind of loan for your personal financial needs is crucial.
If you opt for an adjustable rate mortgage (ARM loan), for example, but plan to stay in the home long-term, what is your end-game for the ARM loan? Why are you applying for it? A fixed rate mortgage is better for those who plan to keep paying on the mortgage long-term, but an adjustable rate loan can cost you more money the longer the loan goes.
If you buy a home with an adjustable rate mortgage and sell before the first or second mortgage loan interest rate adjustment, the ARM loan makes more financial sense. And that is a factor to seriously consider when choosing a loan and a home to buy with it.
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Getting Started With Your FHA Loan Application
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