FHA Document Checklist for Loan Processing
The loan processing stage requires work from a lot of different people and is often where a mortgage application may see the most delays. Being mindful of this basic FHA document checklist will help you navigate through the loan processing phase more efficiently. Having an idea of what to expect and ensuring that your buyer profile is complete will help you get through some of the more common obstacles to FHA loan approval. Once your profile is put together and all documents are collected, an underwriter will work to review your file to make certain that you are free of any discrepancies.
Assuming everything in your application is put together as it should be, you should expect good news if your credit score is in line with the minimum FHA credit requirements and that you have the cash you need for your initial down payment and mortgage closing costs.
If, for some reason, your mortgage professional informs you that your loan application is missing some of the necessary documents, it is at this point that you will be informed for a follow up submission.
For reference, below is a glance at the basic documents that should be included in your home loan application.
Your FHA Document Checklist
FHA Case Number
Once you have started the loan processing phase, you will have already been given a FHA case number by your mortgage provider. This is a number that comes from the Federal Housing Administration and it helps associate your file with a federally insured home loan. If the property you are after is a multi-family unit or something other than a single-family home, the FHA case number helps show that the property is a FHA approval home.
Purchase Contract and Disclosure Statements
Your lender will also need to review the home purchase contract to make sure that the terms of purchase are not in violation of or contradictory to any of the FHA home requirements. Your FHA approved lender will want to review every official document that has been completed by the buyer and seller together, leading up to your request for appraisal. Producing this information should be simple as your appraiser would have already asked to review this same information.
Your Credit Scores and Report
This is one of the most common things that anyone lending you money will want to see. You credit report is great indicator of risk and it helps create an understanding of risk specific to the lender’s expectation of whether or not you will pay back your financial obligation. If your credit is bad, this is a sign to the lender that you may not be someone that is good at paying your bills on time. If you put yourself in the lender’s shoes, you would be more likely to lend to someone that has a reputation of paying everyone back on time and with interest.
A credit report is your financial reputation and lenders use it to determine how risky you may be as a borrower.
Fortunately, the FHA helps applicants with bad credit out. Do you know the home credit requirements? If not, click here to learn more.
Buyer’s Employment History and Verification
This is one of those very typical information requests that helps a lender validate whatever you disclose your income to be. A verification of employment form will show an approved lender what your previous two years of job history look like. This will also show what your earnings have been over this same period of time. People often provide this using a collection of recent pay stubs and tax forms like a W2 or 1099.
Buyer’s Bank Account Deposit Verification
To further substantiate that your income actually goes to a bank account that you control, plan on including full bank statements that show what your bank account balances have been for the past three months. You can provide either your full statements or request that you bank provide you with a form that verifies your account history.
The title company (or the escrow company) will provide you with details on what your transaction will look like. Click here to learn more about what happens in the escrow process after your loan application is approved.
Preliminary Title Reports
The title company will work to research the property you’re after and ensure that there is nothing standing in the way of you and your mortgage. The preliminary title report will come from the title or escrow company that is insuring the home’s title and things they look out for include any pending legal issues, tax or other liens, or other outstanding items that may affect your home’s title.
FHA Approved Home Appraisal
You loan application will require that you include a recent appraisal from a FHA approved home appraiser. The home appraisal expert will review your property of choice and analyze it for overall acceptance. Things that appraisers typically look at include total square footage, property condition, the overall value of the home, and the value of the home compared to the neighborhood.
Letters of Explanation (as needed)
Sometimes a borrower has bad credit or items on their report that require a lender to impose lender overlays. In cases like this, a lender may require that you provide explanations for certain things to provide a little more detail surrounding important risk factors including your credit report, employment history, bank statements, your source of funds, etc. An explanation may be something that is requested as a follow-up item to your original application submittal.
Additional supporting documents
Everyone has a unique situation and depending on yours, you may need to prepare additional paperwork to help get your application through the loan processing phase. From divorce and bankruptcy to being a business owner, it is possible that you will need to share additional paperwork with your loan underwriter. In some cases, a new home buyer may have received a cash gift for use towards down payment on a home. This is another case where additional information such as an explanation around source of funds may be important.
Submitting Your Loan Application For Approval
If your loan application is complete and ready for an expert review and analysis, the underwriting process begins and you are one step closer to being approved. Once your application has been submitted, a mortgage underwriter will work to determine your capacity, collateral, and credit.